Smartphone wars erupt

Smartphone customers losing faith in Samsung have plenty of choice at a time when Apple, Google, LG and China’s Huawei are each pushing new models that up the features ante and do not self-combust.

The first rule in a corporate crisis is to staunch the bleeding. However, PR experts say, Samsung Electronics bungled in not just misdiagnosing the fault afflicting its top-end phones but appearing uncommunicative with an aloof bedside manner.

As a result, the South Korean company has its work cut out as it embarks on a vast and costly exercise to win back trust and prove that it is still a byword for quality at a time when its rivals are going full tilt in the smartphone wars.

“The basis of crisis management is to make sure that when you give a solution, it’s the right solution and it is going to enable you to move forward,” Andy Holdsworth, a crisis management specialist.

That has not been the case with Samsung. Perhaps reluctant to lose too much ground to rivals, who were busy launching their own new models, the company rushed out replacements for its Galaxy Note 7 ‘phablet’ series when some in the first global batch spontaneously caught fire.

The incendiary problem persisted, however, and now Samsung has been forced to scrap the entire line in an embarrassing setback for a brand image that took years to build up.

Some airplanes had banned passengers from boarding with the phones. Social media is rife with anger and ridicule. One video, of a Burger King employee gingerly handling a smoking Note 7 with oven gloves, has gone viral.

Mr Holdsworth said Samsung’s response throughout had been ‘disjointed’. “You kind of lose faith in it because your remedy suffered the same problem and this problem is quite a dangerous one,” he added.

“The loss of sales from the Galaxy Note is only the tip of the iceberg,” warned analyst Jasper Lawler. “Demand for the flagship Galaxy S8, scheduled for release early next year, could be severely impeded by the loss of consumer confidence in the Samsung brand.”

It could be worse. There has been no loss of life. And other companies have also struggled with the challenge of extracting more power and faster charge times from the lithium-ion technology used in smartphones today.

Boeing suffered electrical fires from the lithium-ion batteries aboard its new 787 jet.

There may be no quick fix to undo the past few weeks, during which it appeared that Samsung’s official response appeared to lag that of national regulators, airlines and mobile phone carriers.

But Samsung should at least shed any inhibitions it may feel about being more forthright with its customers, said Yves Robert-Paul, who heads crisis communications for advertising group Havas. Since the company started recalling the phablets last month, he claimed, it offered only ‘a pragmatic response, devoid of all emotion’. “They’ve run it like an industrial disaster but they forgot to think about their customers.”

But City Index’s Ken Odeluga said that nobody wants to believe Samsung has ‘lost its touch’ at producing beautiful and advanced consumer technology. “So there is some underlying sentiment that views its problems as the kind of bad luck which could afflict almost any smartphone maker that is pushing boundaries,” he said.

Meanwhile, all of Samsung’s competitors are ‘rubbing their hands in glee’, said Thomas Husson, an analyst with the Forrester technology research and consultancy firm. “It’s basically a good product, released at the right time, but a slip-up, and we’ve seen in the past with Nokia or Blackberry that these can have disastrous effects.”

While it is too early to predict a similar disappearance from the phone market of the South Korean company, rivals are nipping at the heels of the market leader. These include not only Apple, LG and Chinese companies like Huawei, but also internet titan Google, which entered the smartphone market last week with its own device - the Pixel.

“There will inevitably be some moderate-to-marginal benefit for Samsung’s handset rivals, more particularly Apple, perhaps faster-growing Huawei can benefit more from Samsung’s Note 7 travails,” said analyst Ken Odeluga.

One of the largest providers of network infrastructure globally, Huawei has been pushing into the smartphone market, including the top-end segment with its P9 model that features a camera with two Leica lenses.

And the LG G2 smart phone made its debut at a news conference in the US this month.

The blow to Samsung is unlikely to be fatal, however. “Competitors might enjoy a short-term boost to sales as a result of a major player having to withdraw its new model, though overall it is likely to remain a competitive market,” believes analyst Laith Khalaf.