Company / division: Samsung
Samsung released preliminary numbers a few days ago, and rather shocked everyone by previewing some of its best results in a long time (and its best operating margin ever). Until today, though, we didn’t know the precise breakdown by segment behind those numbers – now we do: the mobile business rebounded decently from last quarter, but is still a shadow of its former self in terms of both revenues and profits, while the semiconductor business is going gangbusters. The latter provided a quarter of revenues but a little over half of operation profits for Samsung Electronics last quarter, and was the major driver of that fantastic overall operating margin. An increasing focus on premium products and rising prices driven by tight supply versus demand both helped that division, while on the mobile side Samsung seems to have done a good job selling Galaxy S7 phones to those who might otherwise have bought a Note7. It looks like Q1 might be a little tough on the mobile side – we won’t get a Galaxy S8 at Mobile World Congress in February, meaning Q1 will be the lull quarter before a likely launch in Q2. But overall this is a pretty decent set of results for a company dealing with the fallout of the Note7 recall.
via Samsung Electronics Announces Fourth Quarter and FY 2016 Results – Samsung (Samsung’s earnings deck with lots more detail here and there’s more coverage on Techmeme. You might also be interested in the Samsung Q4 2016 deck which is part of the Jackdaw Research Quarterly Decks Service)
Samsung Electronics Announces Cause of Galaxy Note7 Incidents in Press Conference – Samsung (Jan 23, 2017)
See the Techmeme link below for full coverage of the press conference by reporters; the full press conference can be viewed here, with the conference starting around 29:30; and there’s some more detail on testing and other elements here. The related narrative has also been updated today to reflect the latest news.
My to-do list for Samsung at this press conference was as follows: demonstrate that the company really had found the root causes of both sets of battery fires, in a way that was credible; where possible have third parties involved; and talk through the changes to manufacturing processes to avoid these issues in future. It checked off each of these items at its press conference, so in that sense it did exactly what it needed to do: so far, so good. On the other hand, the results indicate that the manufacturing processes at Samsung’s battery partners were in some cases pretty shoddy, and that its own designs put pressure on batteries. So it’s not just the battery manufacturers at fault here, and a big part of the problem is lack of quality control –Samsung’s third party investigators were able to find faults in batteries that hadn’t caught fire, and replicate the conditions in which devices caught fire. The big question is therefore why Samsung wasn’t able to do so. All this suggests a lack of care around product testing and likely also a rush to market for competitive reasons which then shortchanged the manufacturing process. I have confidence that Samsung will make big process changes going forward, but less confidence that the culture that led to these problems will change in the same way.
via Samsung Electronics Announces Cause of Galaxy Note7 Incidents in Press Conference – Samsung Global Newsroom (full coverage on Techmeme here)
We’re finally coming to the end of this saga, with one of the most visible and painful reminders of the fate of the Note7 going away. Though the 96% return rate likely is a major factor in the decision, the fact that most Note7 devices remaining now won’t charge either thanks to the recent carrier updates is likely another – those who have these phones will find it very hard to do anything dangerous with them. The last remaining chapter in this story is now Samsung’s long-awaited disclosure of the root causes for the fires, and its plan for avoiding similar issues in future.
Apple has invested enormously in its green initiatives under Lisa P Jackson, arguably one of the biggest and most visible changes under Tim Cook, who seems determined to use Apple’s power for good beyond the influence of its products alone, to a much greater extent than Steve Jobs was. For Apple to come out on top of the major tech companies is still quite an achievement, though Google and Facebook also did well. It’s not clear that most consumers care all that much about any of this, but there’s an argument to be made that these companies are seen as leaders in the field, and Greenpeace’s endorsement puts pressure on others to fall in line, which has broader environmental benefits.
These are remarkable results in the quarter after the Note7 fiasco began, and the quarter in which the recall itself really began. Revenues are very close to last year’s, while operating profits are the third highest ever after two quarters back in 2013. We’ll have to wait for the final results to come out later this month to see the breakdown, but the Reuters report makes it sound like both smartphones and semiconductors did well, which would be impressive if it’s true.
There’s a little too much hype in the headline here – this isn’t the future of laptops as much as the present, but as Chromebooks rather than Windows machines. The sort of convertible model Samsung is using here has been growing among Windows PCs for years now. In some ways the more interesting difference is that these laptops are being priced more like mid-range Windows PCs rather than cheap alternatives, as Chromebooks have been in the past. OEMs seem to be banking on Android integration to sell these machines now that price isn’t really a factor anymore.
Samsung has sold smart TVs for years, but they’ve generally been standalone devices, rather than being driven from a smartphone or app, despite an earlier project which was intended to use tablets as a remote. This new functionality looks like Chromecast, and may well be a response to competing TVs using actual Google Cast technology. As with most of Samsung’s services, though, it’s unlikely to be a big hit.
Shara does a great job here of stating the challenge Samsung faces heading into CES, where it holds the biggest press conference of any exhibitor but tends not to make smartphone announcements. I’m concerned that we still don’t have an official explanation for the Note7 fires, which means the story will keep sticking around, and will keep making people – especially those who’ve never bought one – think twice before buying a Samsung phone.
Much of this piece piggybacks off the Flurry data I linked to earlier, but there are some additional comments from an NPD analyst which form the basis of the headline. The point here is that Samsung did suffer from the Note7 recall, but not nearly as much as it might have, because most buyers stuck with Galaxy phones rather than switching to iPhone. This reinforces the point that Apple and Samsung (in that order) have the highest smartphone loyalty rates by far, which has certainly helped Samsung this year.
T-Mobile rolls out battery shutdown update to remaining Galaxy Note 7s | AndroidAuthority (Dec 27, 2016)
This is the beginning of the end for the Note7 saga, which began all the way back in early September. The four major US carriers, starting with T-Mobile, are rolling out what are effectively kill updates that will shut down the remaining Note7 devices in use. Over 90% of those devices have already been turned in, so this is really about capturing the holdouts. This is also the beginning of the end for the PR nightmare that’s kept this story in the news far longer than Samsung would have liked.
Galaxy Note 7 recall did not damage Samsung brand in U.S.: Reuters/Ipsos poll | Reuters (Nov 20, 2016)
The actual findings here are more complex than the headline suggests – those who had used Samsung devices tended to be relatively unfazed by the recall, while non-users’ opinions were swayed more, results that have been borne out by other surveys too. In other words, Samsung shouldn’t lose many customers over the recall, but might find it a little harder to win converts.
FAA Bans Note7 From All Flights (Oct 14, 2016)
The FAA finally banned all Note7 devices in any state from flights, following earlier partial bans, and mandated safety warnings on all US flights which lasted into January 2017.
Samsung Cuts Q3 Guidance Over Note7 (Oct 12, 2016)
The financial impact of the Note7 debacle began to become clear, as Samsung formally reduced its revenue and profit guidance by several billion dollars (its final results for Q3 would be broadly in line with this guidance).
Samsung Ends Note7 Sales Worldwide (Oct 10, 2016)
Samsung finally announced that it would stop selling the Note7 in all countries.
First Report of Replacement Samsung Note7 Fire (Oct 5, 2016)
The first report came in of a replacement Note7 – theoretically the safe version – also catching fire, prompting calls for a complete recall.
Bloomberg Reports Samsung Rushed Note7 Development (Sep 19, 2016)
Bloomberg reported that a rush to beat the iPhone 7 to market had caused Samsung to shortcut its development process for the Note7, possibly leading to the faults that triggered the fires.
Samsung Issues Partial Formal US Note7 Recall (Sep 15, 2016)
Samsung issued a partial formal recall through the US CPSC which lacked the force of a full recall, and focused only on the first-generation devices with the supposedly faulty battery.
Samsung Note7 Sales Suspended + Informal Recall (Sep 2, 2016)
Samsung suspended sales of first-generation Note devices and issued an informal recall, while promising that replacement devices with different batteries would be available very soon.
First Reports of Samsung Galaxy Note7 Fires (Aug 24, 2016)
Reports began to trickle in about fires caused by the Galaxy Note7, and eventually the trickle turned into a steady stream, with dozens of cases reported in the US alone over the space of a couple of weeks.
Samsung Galaxy Note7 Goes on Sale (Aug 19, 2016)
The Note7 went on sale on August 19th in the US with all the major carriers, off the back of mostly very good reviews from major tech publications.