The success of Samsung Electronics Co's latest Galaxy phone, set to be
launched in New York on Thursday, could hinge on a supply backup plan
aimed at preventing a repeat of a costly snag for its premium smartphone
Some analysts predict the new Galaxy S IV could top 10
million unit sales in the first month after its launch, so any hiccups
in the smooth delivery of core components could be disastrous.
risks are high. A simple manufacturing snafu involving unsatisfactory
design of handset cases cost Samsung some 2 million units of lost sales
in just a month after it launched the S III in May last year.
could be, again, a supply bottleneck due to tight supply of components
but I think any such disruption will be very brief, as Samsung is making
a bigger bet on the S IV than on its predecessor with a backup plan to
avoid such disruption," said Greg Noh, an analyst at HMC Investment and
After pre-empting its launch with a marketing blitz
for the new Galaxy phone, the South Korean electronics giant also risks
having overhyped its new phone, analysts warn. They say consumers could
be disappointed if it has only incremental improvements rather than the
dazzling features they've come to expect.
Samsung picked the
United States for the launch of its top-selling Galaxy series, hoping to
regain its lead in the crucial U.S. market. Apple Inc outsold Samsung
there for the first time in the quarter ending in December, even after
Samsung spent a record $400 million on phone advertisements there last
The stakes are especially high for Samsung, which derives
the majority of its annual profits from the product, while growth rates
for the global smartphone market taper off.
J.K. Shin, head of
Samsung's mobile business and a newly elected board member, will skip
his first Samsung shareholders meeting on Friday in Seoul in order to
attend the Galaxy launch at the Radio City Music Hall.
to be a blockbuster phone that beats its predecessor and competitors in
nearly all aspects, otherwise Samsung could follow the footsteps of
others and fail to manage expectations, which get only higher," said
David Choi, an analyst at SK Securities.
declined to comment on steps they've taken to ensure supplies keep
flowing, but some analysts said a disruption of any component part could
potentially cascade, interrupting deliveries.
"Based on checks we
had with suppliers, Samsung has already done significant work to ensure
smooth supply and not to repeat what they had to deal with last time,"
said Lee Seung-woo, an analyst at IBK Securities.
"For now it appears there's no major issue at all, but obviously we have to wait and see how smoothly it goes after the launch."
Of particular concern are eight-core processor chips and screens, or even simple handset cases.
cases again appear to be in tight supply, and Samsung may use two
different processors to maximise battery efficiency through the right
combination of chips for different network conditions to yield the best
performance," Noh said.
The new Galaxy phone
is widely expected to boast crisp, full high-definition quality
pictures, a slightly bigger 5-inch screen, a 13 mega-pixel rear camera,
and an improved eight-core processor.
Earlier media reports had
also suggested the new Galaxy, which uses Google's free Android
software, may have functions that track the viewer's eye movement, and
boast an unbreakable or flexible screen.
Whether that will be enough to excite consumers is debatable, analysts say. Samsung declined to comment.
so many great things speculated about the S IV, it could actually
disappoint in terms of wow factors," said Choi at SK Securities. "If you
see Samsung's share price, which hasn't moved much of late, I think you
can get a more cool-headed assessment of what's coming."
of Samsung, which has a $220 billion market value, have fallen 1 percent
so far this year, while Apple shares tumbled nearly 20 percent as
disappointing sales of iPhones raised fears that its dominance may be
"It's about the buzz they can generate around the product," said Ben Wood, an analyst at mobile consulting firm CCS Insight.
has developed a cheeky TV ad that mocks Apple customers, and
dramatically ramped up spending on marketing and advertising, a
cornerstone of Apple's success.
"It's not afraid to carpet bomb
the world with marketing efforts to make sure nobody on the planet
misses out on the story of the Galaxy IV," Wood said.
bravado underscores how far Samsung has come since its first Galaxy,
which debuted in June 2010 in answer to the runaway success of the
iPhone. That propelled Samsung to become the world's top smartphone
maker, vexing Apple which virtually created the smartphone market with
its first iPhone in 2007.
The touchscreen-based look and feel of
the Galaxy also prompted Apple to file global patent disputes against
the South Korean firm.
In 2012, Samsung surpassed Apple as the
world's largest maker of smartphones, controlling 30 percent of the
market versus Apple's 19 percent. But in the high-end market, sales of
Samsung's Galaxy S and Note still lag far behind Apple's iPhone, the
best-selling smartphone globally.
As overall market growth slows,
however, it is also becoming more competitive. Rivals such as LG
Electronics Inc and Huawei Technologies have announced
products with features and hardware comparable to those the upcoming
Galaxy will reportedly have.
"I'm expecting them to come out with
some new features they can hang their hat on," said Avi Greengart, an
analyst at Current Analysis, referring to the Galaxy launch.
long as the Galaxy S IV doesn't regress and as long as it's competitive
with the flagship phones from other phone manufacturers, I give it
really good chances of winning consumer sales even if it isn't different
for the sake of being different."
© Thomson Reuters 2013