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(News Focus) Samsung aims to use Galaxy S8 to lead global smartphone market

2017/03/30 00:03

By Kang Yoon-seung

SEOUL, March 30 (Yonhap) -- Samsung Electronics Co. on Thursday showcased its newest flagship smartphone, the Galaxy S8, that it hopes will shoot it firmly to the top of the global smartphone market following setbacks caused by last year's Note 7 recall.

The Galaxy S8 is the first flagship smartphone to be introduced by Samsung after it suspended production of the Galaxy Note 7 on reports that some devices caught fire while being charged. The development dealt a blow to Samsung's handset sales and earnings as well as damaged its brand image.

Industry watchers estimated that the Galaxy Note 7 incident cost Samsung some 7 trillion won (US$6.28 billion), including opportunity costs.

Samsung's new flagship S8 will come with the company's new AI system aimed at improving overall user experience. (Yonhap) Samsung's new flagship S8 will come with the company's new AI system aimed at improving overall user experience. (Yonhap)

According to industry tracker Strategy Analytics, Samsung made up 17.7 percent of the global smartphone market in terms of units sold in the fourth quarter of 2016, marking the lowest level in nearly six years. Its U.S. rival Apple Inc., on the other hand, accounted for 17.8 percent.

In the third quarter of 2016, Samsung and Apple accounted for 20.1 percent and 12.1 percent of the market, respectively. Industry watchers said coupled with the rise of Chinese rivals, the damage to the company's reputation was attributable to the falling market presence.

Despite such tribulations, Samsung expressed confidence that the Galaxy S8, which comes with a brand-new design as well as the artificial intelligence program Bixby, will open a new chapter for the company and smartphones as a whole. The company has not announced sales targets, but insiders are expecting solid numbers.

Industry watchers so far are cheering the new design and cutting-edge features of the Galaxy S8.

While the Galaxy S7 smartphones came with two models -- a flat-screen and an edge version that boasted a slightly wider screen by bending both ends -- the new flagship will be released as the 5.8-inch Galaxy S8 and 6.2-inch Galaxy S8 Plus. Both have curved front screens and a general footprint that is roughly on par with Galaxy S7 variants that had smaller 5.1-inch and 5.5-inch screens, respectively.

Samsung made the bezel much slimmer compared to other models, removing the home button on the front. Instead, the fingerprint scanner has been relocated to the back side. Industry watchers said such an update came as a rising number of smartphone users are enjoying gaming and video content that calls for more screen real estate.

Among the cutting-edge features offered by the new flagship is Bixby, which will provide users with features similar to Siri, the voice recognition system of Samsung's archrival Apple Inc.

The company said Bixby is a new intelligent interface that will be "fundamentally different from other voice agents and assistants in the market." The company said its AI system will be different from rivals in terms of "completeness," "context awareness" and "cognitive tolerance."

   Reflecting Samsung's confidence in the Galaxy S8 potential to woo customers, Koh Dong-jin, head of Samsung's smartphone business division and who was responsible for the Galaxy Note 7, introduced the new flagship at the showcase event.

Koh was initially expected to be sacked for the phablet scandal, but Samsung decided to keep him on for the new flagship.

"The impact of the Galaxy Note 7 will be eliminated after the release of the Galaxy S8. The second quarter's earnings in the IT and mobile sector should rebound to that of last year," KTB Investment & Securities Co. said.

Others, however, said it may be too early to say that the sales of the Galaxy S8 will exceed that of the S7. Combined S7 sales reached 50 million units last year.

"The combined sales of the two versions of the Galaxy S8 are estimated at 42 million units," said Yoo Jong-woo, an analyst at Korea Investment & Securities Co.

"Although the expectations for the device itself are high, the sales outlook remains conservative due to the possibility of a higher price and the release of a new iPhone in the coming months," Yoo added.

Korea Investment & Securities estimates the production cost of the Galaxy S8 to be 7 percent higher than its predecessor, largely due to a pricier display and internals.

"Samsung attracted iPhone users by choosing a wider display when it released the Galaxy S3," Yoo said. "Apple also revitalized its sluggish sales through a large-screen iPhone 6."

   Accordingly, the researcher said Samsung's strategy to adopt a nearly bezel-free smartphone could be successful, especially since the new devices have a more expansive screen.

Industry watchers added the success of the Galaxy S8 is also crucial to soothe investors' concerns about the challenges facing the company, including the arrest of Lee Jae-yong, the vice chairman of Samsung Electronics and the de facto leader of Samsung Group.

Lee has been detained since last month over his alleged role in a corruption scandal that led to the ouster of former President Park Geun-hye. Industry watchers had speculated it would not be easy for the company to make major decisions when its head is currently behind bars.

Samsung also faced public criticism after it suggested that it will be delaying its transition into a holding company structure.

The company said in November that it will seek a change in the management structure, which includes splitting itself into a holding company and an operating company, to boost shareholder returns.