Will the spectacular failure of the Samsung Note 7 kill Android? A data-driven analysis
Image: ZDNet
The Samsung Galaxy Note 7 is the high-end product in Samsung's Android phone line. It's just been pulled from the market because a number of phones have gone boom while in customers' hands. Given that Samsung is, by far, the leading Android phone vendor, and its top-of-the-line device has melted down (literally), does this mean that Android itself is doomed?
Here's the tl;dr answer: probably not. For a more nuanced look, let's check out some numbers.
The damage done
Galaxy Note 10
If there's one thing no product manager ever wants to hear, it's this: a plane was evacuated because their consumer electronics device caught fire on the airplane. Not good. This was just one of the incidents that led to the demise of the Note 7.
We've covered the timeline of the Note 7's eight weeks on the market in some detail, so I won't rehash it. But for those of you who haven't been following along, not only did the original Note 7 have a tendency to burst into flames, so did several replacements.
The result was a product that had been very positively received is now no longer for sale. Boom, bang, burn, bluster, fizzle, done.
According to well-respected smartphone analyst Neil Cybart, about 2.7 million Note 7 devices were included in the recall. Based on Note 5 sales (remember, there never was a Note 6), Samsung probably expected to sell between 20 and 22 million units. Samsung has cut its Q3 profit estimates by $2.4 billion, and its Q3 revenue estimates by $2.2 billion.
Cybart views this as a possible windfall for Apple. Starting with the estimate of 20-22 million Note 7 buyers who now won't be getting or keeping their Note 7s, he estimates that three to five million users will simply keep whatever other devices they already have. He then goes on to estimate that about 8 million will remain loyal to Samsung. They'll simply buy another Samsung device, possibly the Galaxy S7.
He goes on to estimate that about 9 million buyers will turn to Apple as a direct replacement for the Note 7. But he also expects that, over the course of the year, another 5-8 million people will buy Apple instead of Samsung (or other Android devices) due to safety concerns or worries about manufacturing qualities. He adds a few more million by estimating that potential Android switchers (I was one, back when I moved to the Galaxy S4) would be turned off by the Note 7 debacle and stay with Apple.
All told, it's looking like about 20 million phone users who would otherwise be Android users will wind up in the iPhone camp. That's a lot of users, but it's a mere drop in the bucket when it comes to the size of the overall Android market.
Android momentum
There are roughly two billion smartphones in use worldwide. Of those, Gartner estimates that 85.2 percent are Android devices, and the rest are mostly iOS devices. Android's market share growth has slowed, but that's only because it has pretty much gobbled up the market from everyone but Apple.
If we use Statista's estimate of 2.082 billion smartphone users in 2016, and slice off Apple's 13.8 percent, we're left with about 1.7 billion Android users, worldwide. That's slightly more users than the entire population of China, plus the entire population of the United States.
So let's look at those 20 million users who will probably move to iOS because of the Note 7 issue. 20 million is only 1.176 percent of 1.7 billion. That's barely enough users to constitute a rounding error.
So, from merely a jump-ship perspective, there's no way the Note 7 meltdown will measurably impact Android's overall share or penetration.
Of course, there are other factors worth considering.
Let's talk apps
As of June, Statista estimates that there were about 2.2 million apps in the Google Play store, compared to about two million apps in the Apple App Store. Buckle up, because the numbers we're about to get into are extreme.
Even though Apple has only about 14 percent of the smartphone market, it has almost 48 percent of all apps on the market. And check this out. According to app analytics firm App Annie, while Android users downloaded twice as many apps as Apple users, the iOS app store brings in 75 percent more revenue. The iOS users spend 2.5 times more on in-app purchases than their Android brethren.
So while there is undoubtedly a vibrant Android app market, which will continue to thrive despite the Note 7's downfall, the Apple app market is blowing it out of the water -- in both absolute and relative terms.
Still, that doesn't mean that Android is tanking. It just means Apple folks tend to be a lot more spendy.
Show me the money
In another one of their wonderful charts, Statista summarizes KPCB / Morgan Stanley research to show how much lower the average selling price (ASP) for an Android phone is, compared to an iPhone.
As you can see, the ASP for Android worldwide is now a little over 200 bucks (normalized to US dollars), while the typical iPhone spend is more than $650. In other words, most Android purchasers could buy three Android phones for the price of one iPhone.
Of course, that doesn't tell the whole story. Most of those $200 phones are much lower end than the average iPhone. They're also much lower end than the typical flagship Samsung phone. This brings us back to both the Note 7 and the Galaxy S7.
Back before the Note 7 was unceremoniously yanked from production, ZDNet's intrepid phone reviewer Matthew Miller noted that, "The 64GB iPhone 6s Plus is $849 and the T-Mobile Samsung Galaxy Note 7 is priced the exact same."
In other words, the ill-fated Note 7 was actually four and a half times more expensive than the average purchase price for Android phones. So, like the iPhone, the Note 7 was a premium -- a very premium -- phone.
For those considering replacing the Galaxy Note 7 with the Galaxy S7 (the slightly smaller equivalent -- essentially, the non-Plus model), you might have some difficulty. While both Verizon and T-Mobile stock the S7, the only model they stock is the 32GB model. Verizon lists it at $672. T-Mobile lists it for almost a hundred dollars less, at $579. Even so, both of these are also premium phones, much closer to the average Apple selling price than the average Android selling price.
For those of you who like math, consider this. Despite all the higher-end flagship Android phones, many of which cost roughly $500 and up in US dollars, the average Android phone is $208. Since the higher end phones are driving that number up, that means that there are a lot of sub-$200 Android phones in use worldwide.
There are also a lot of phone models and manufacturers. Last month, I showed that there are more than 24,000 distinct Android device models on the market. There are, according to OpenSignal, 1,294 individual Android device brands. That's a lot of builders making a lot of models and, in the main, selling them for cheap.
So, is Android dead or what?
No. No it's not. Android is thriving. Even though the Note 7 was a huge embarrassment for Samsung, it won't have an impact on the market. As we've shown, the Note 7 (and its previously expected user base) is a mere drop in the bucket, when compared to the overall Android market. We've also shown that there is a tremendously vibrant app market, although not as profitable as Apple's.
Finally, we've shown the key reason the Android market will survive despite the Note 7's failure: price. Android users can get into the smartphone game for a fraction of the cost required by Apple. Such a price advantage (even if the performance is lower on the low-end phones) will always prop up a market.
There is, however, one caution all smartphone manufacturers should take into account. I know it's easier said than done (at least for Samsung, apparently), but do not make faulty phones. If the Samsung Note 7 battery fiasco is repeated, either by more Samsung models or by other manufacturers, consumers will lose their trust of these devices.
While there is probably nothing that could rip Android smartphones from the hands of users worldwide, an ongoing epidemic of 'sploding smartphones would put a crimp in the industry's sales -- and probably drive more users to Apple, despite the cost. That, of course, is assuming Apple can avoid the mistakes Samsung made and ship phones that don't blow up.
Update: Corrected references to S6 and updated to S7.
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