There are two pieces of very good news this week if you are an Apple (NASDAQ:AAPL) investor worried slumping iPhone sales could get even worse. The first was a dramatic end to the Qualcomm (NASDAQ:QCOM) lawsuit, saving the day for the prospect of 5G iPhones next year. The second had nothing to do with Apple, but it’s sure taking some pressure off AAPL’s incremental approach to smartphone design. Samsung’s new $1,980 Galaxy Fold smartphone was released to reviewers this week and quickly ran into a storm of negative press. The smartphone with the futuristic new folding screen has suffered catastrophic failure for multiple high profile journalists.
Depending on how this plays out, Samsung’s growing PR problem is likely to be good news for Apple stock.
Samsung Galaxy Fold Review Units Failing With Broken Screens
At the end of February, Samsung made a big splash with the announcement of the Galaxy Fold. The company’s new flagship smartphone featured a futuristic Infinity Flex folding display that transformed it from a phone to a 7.3-inch tablet. Launching on April 26, the radical new smartphone would be priced starting at a whopping $1,980.
It would also be the first folding smartphone to be widely commercially available in the U.S. China’s Huawei has also announced a folding smartphone — but the company lacks an American presence.
So far, so good for Samsung. The company was in the spotlight once again, smartphones were cool once again (after a year where global smartphone sales had been sliding), and Samsung was looking like the industry design and engineering leader — after years of being pegged as an iPhone copycat.
Then the Galaxy Fold review units went out.
Within a day, the reports of broken displays began to arrive. The Verge’s Dieter Bohn reported his review unit’s folding display developed a bulge then its OLED display failed after just one day of use. Bloomberg’s Mark Gurman posted that his Galaxy Fold was “completely broken and unusable just two days in.” Again it was a failure of the folding display. CNBC’s review attempt ended when the Galaxy Fold they were given was “completely unusable after just two days of use.”
And there were more. It’s possible the reviewers all received phones from an initial batch that suffered a manufacturing defect. It’s also possible that Samsung’s folding screen design is flawed and not ready for prime time.
Samsung issued a terse statement to The Verge:
“A limited number of early Galaxy Fold samples were provided to media for review. We have received a few reports regarding the main display on the samples provided. We will thoroughly inspect these units in person to determine the cause of the matter.
Separately, a few reviewers reported having removed the top layer of the display causing damage to the screen. The main display on the Galaxy Fold features a top protective layer, which is part of the display structure designed to protect the screen from unintended scratches. Removing the protective layer or adding adhesives to the main display may cause damage. We will ensure this information is clearly delivered to our customers.”
Company representatives also told The Verge they plan to continue with the Galaxy Fold’s April 26 U.S. launch.
Bad News for Samsung, But Good News for Apple
For Samsung, this is bad news.
Comparisons have already been made to the Galaxy Note 7 disaster of 2016 that decimated the company’s smartphone profits and allowed Apple to surpass Samsung as the world’s top-selling smartphone maker — at least for one quarter. It’s not on the same level in the sense that the Galaxy Fold screen break isn’t a safety issue, but at $1,980 a pop and with pre-orders selling out almost immediately, the company is facing a big PR issue and the possibility of a release delay (or a recall if it goes ahead as planned) while it investigates what’s going wrong.
For Apple, the very public and very rapid failure of multiple Galaxy Fold review units is nothing but good news.
Apple stock has been under pressure from slowing iPhone sales. And with rivals like Samsung and Huawei showing off radical new folding smartphone flagships this year, AAPL’s iPhones were looking far from exciting. If the initial Galaxy Fold failures develop into a full-scale debacle, the lack of its own folding smartphone at this time will turn from Apple falling behind, to Apple avoiding gimmicks and sticking with solid, proven engineering.
Incremental design updates may be boring, but quality and reliability is something that Apple can leverage as it works to boost iPhone sales.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.
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