Samsung to gamble by delaying the Galaxy S8 and sticking with the Note brand

Samsung has defied the Note7 debacle to increase its profits by 50%, but there are plenty more challenges to come for its mobile business and elsewhere.

While the profit improvement was provided by other divisions such as components (although presumably not batteries), the performance of the mobile division, if you strip out the Note7 unpleasantness, was also quite healthy.

The 2017 outlook, however, remains complicated. For the whole group there’s the matter of the Korean political corruption scandal, which could still embroil Samsung’s senior leadership. And then there’s the matter of this year’s flagship devices, both of which have significant question marks against them.

The Galaxy S8 is arguably Samsung’s most important flagship device launch yet, as it’s having to carry the load for the currently defunct Note phablet family. If the launch of the S8 is anything other than flawless the implications for Samsung’s mobile division could be very severe indeed, which is probably why Samsung is reportedly delaying its launch and not unveiling it at MWC, as it has traditionally done. Additionally the S8 looks set to be the first to carry Qualcomm’s new flaship Snapdragon – the 835 – so that will put extra pressure on the testing process.

This pressure is even greater in the light of Samsung’s reported decision to stick with the Note branding for its phablet. Samsung seems to be counting on everyone accepting the Note7 explosions were an exceptional set of circumstances that it has now guaranteed won’t happen again. That might persuade the majority of people who try to understand its infographic, but expecting the mass market to forgive and forget is a risk.

Telecoms.com spoke to Neil Mawston of analyst firm Strategy Analytics to get his take on the current Samsung situation. “Samsung’s disciplined cost control, streamlined product portfolio and its success in transferring most Note7 owners to new Samsung models helped the firm’s mobile division bounce back strongly into profit this quarter,” said Mawston. “Samsung’s global mobile shipments and revenue remain a little soft, but profits have recovered sharply.

“The S8 delays are a sore blow for Samsung. Any holdups to the company’s most valuable smartphone model are not good news for Samsung’s financials or competitive positioning. Any delay to Samsung’s S8 flagship launch will open the door a little wider for Apple, Huawei and others to stick their product in the gap. Having said that – following the Note7 fiasco, Samsung must get the S8 100% right before launch, so a delayed smartphone with no defects is going to be infinitely better than a timely phone that breaks down or catches fire.

“Samsung is sticking with the Note sub-brand for now and taking a gamble that its army of loyal fans still trust it enough to buy the next Note8 model. If Samsung does not impress with the Note8 update later this year, it may be forced to scrap the Note sub-brand from its line-up. Attention on the Note8 later this year will be intense and it will be scrutinised like no other model before it. The rumoured Note8 later this year will be one of Samsung’s most important ever new launches.”

In its quarterly announcement Samsung conceded that the smartphone industry is tough right now, but reckons its efforts in AI might be a differentiator. Given the strides being made by the platform owners on their AI platforms that’s far from a given and merely launching solid, reliable, non-volatile devices should be the first priority.