Amid Note catastrophe, a lifeline for Samsung begins to emerge

A Note 7 with an exploding battery
Image: Reddit/crushader

Samsung's unique double recall for the exploding Note 7 was guaranteed to impact the company's bottom line, but the billion dollar question has always been: How much? And according to a new round of evidence, the impact may be less potent than observers initially thought.

First came the data on worldwide smartphone shipments in the third quarter, when Samsung shipped just over 76 million units, excluding Note 7s, according to Cellular News. That's a decrease of about 9 percent over the same quarter a year ago, which while obviously not good for the manufacturer, is within normal parameters.

For comparison, Apple's iPhone shipments suffered an annual decline of 5 percent, and those handsets had nothing comparable to Samsung's nightmare. It's fair to say that consumers are well aware of the Note's failures at this point, but their response to the manufacturer has been restrained thus far.

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"I think people buy the explanation that there was a manufacturing issue, and it will be fixed in the next phone," Jacob Sharony, principal consultant at Mobius Consulting, told Tech Republic. "It's the first major issue Samsung has seen. But it cannot happen again."

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That sentiment is also backed up by a recent survey of 500 U.S. smartphone owners undertaken by ReportLinker. The survey showed that while 60 percent of respondents felt negatively toward Samsung for its handling of the situation, 86 percent said they were still likely to consider a Samsung phone in the future.

Now, one shouldn't make too much of that finding – 500 respondents isn't a slam dunk, as survey methodology goes – but this was a survey of all smartphone owners, including those who weren't even on Android at the time.

Some analysts believe it will just take some more time for the full damage to become apparent and new winners to arise.

"The longer term impact on the Samsung brand remains to be seen. If the first recall was a stumble for Samsung, the second recall of replacement devices face-planted the Note series," wrote Melissa Chau, IDC associate research director for mobile devices, in a recent press release.

"In a market that is otherwise maturing, Christmas has come early for vendors looking to capitalize with large-screened flagship alternatives like the Apple iPhone 7 Plus and Google Pixel,” Chau added.

The idea that mess caused by the Note 7, which faced two subsequent recalls over some batteries catching on fire and exploding, would have existential ramifications for Samsung, is an intuitive one.

Last month, the company slashed its third quarter profit estimate by $2.3 billion over the situation, and analysts have been on the lookout for the next Android manufacturer that will take Samsung's throne in the U.S.

RELATED: Samsung's Galaxy Note 7 problems taking a toll at the retail level, Wave7 reports

And to make matters worse, last week Samsung had to admit that it still doesn't know what was causing the problem, and the confusion could delay future product releases.

But despite the dire situation, Samsung is not yet prepared to throw in the towel for the Note. The company confirmed in a recent statement that the Note brand would live on through the Note 8, promising that Note 7 owners in South Korea who traded their recalled device for a Galaxy S7 would be able to trade that phone for an S8 or Note 8 when they became available.

Again, don't read too much into that. Samsung could just be considering its moves carefully, or it could be looking to undo PR damage done to loyal Note customers. But Samsung's willingness to stick with the Note brand through one more iteration at least offers the possibility that it could make it out of this mess alive.

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