Analysis-Samsung’s reputation hit as prices slashed at home for new premium phone -Breaking
© Reuters. FILE PHOTO – The Samsung Electronics logo is seen in its Seoul office, South Korea on March 23, 2018, at 23:23. REUTERS/Kim Hong-Ji
By Byungwook Kim
SEOUL (Reuters – Samsung Electronics (OTC) has seen the price of its flagship Galaxy S22 smartphone in South Korea drop by half, a blow to its reputation as an iPhone-like competitor.
The handset manufacturer advertised its best smartphone, but provided no information about the performance management software. This is what consumers complained about and filed a class action lawsuit.
These are just some of the reasons why the Korea Fair Trade Commission began an investigation into the largest phone seller in the world last month.
Samsung (KS) is facing a reputation crisis for its high-end smartphones and finances. It seeks to make up two years’ worth of premium sales, which were below analyst expectations and to reverse a market share drop.
“The dispute will inevitably be a big hit to Samsung’s credibility,” said analyst Lee Seung-woo at Eugene Investment & Securities.
Samsung’s Game Optimising Service is the core of these complaints. This service monitors and controls device performance when gaming, to reduce overheating. This software was introduced by Samsung in 2016 just months after it discontinued its Galaxy Note 7 premium model due to a string of battery fires.
GOS limits smartphone performance while gaming as well as when other applications are being used, according to Geekbench. This widely-used performance scorer found that the software could slow down the S22’s CPU by up to 46%.
GOS’s slowdown of S22, the lack of information about it in marketing materials and its inability to turn it off set social media on fire.
ITSub (a YouTuber who specialises on gadgets and has 2.1 million subscribers) stated in a YouTube video, “This is an extraordinary, crazy issue that cannot be excused in any manner.”
Samsung stated that it released an update to enable users to disengage the software without posing any safety risk. The company also announced that they would invest in new hardware and software.
Samsung announced that the S22 series sold 1,000,000 handsets in South Korea after six weeks. This was two weeks quicker than its predecessor.
Samsung Sales may have suffered a small amount of the negative effects from its intentional performance downgrade. However, this effect seems to be limited. According to Kim Ji-san, an analyst at Kiwoom Securities, sales have not been affected by the downgrade.
The S22’s price dropped to 549,000 won (451) thanks to South Korea’s major telecom companies. This is a drop of nearly 200,000 won from its launch at 999,000 won. Apple Inc. (NASDAQ)’s iPhone 13 is now available at 1,090,000 won. Some carriers also offer lower subsidies, around 150,000 won.
According to a representative of LG Uplus Corp who declined to be identified because the subject is sensitive, “When subsidies go simultaneously at all three Telcos, it tends to be the manufacturer paying the contributions.”
According to Counterpoint data, Samsung’s market share of devices above $400 in 2021 fell 3 percentage points, to 17%, while Apple’s grew 5 percentage points, to 60%. Data also revealed that both S20 and S21 sales fell below the 30 million unit first-year average for the S series.
The S22 was launched in February and early shipments suggest that Samsung will sell more than 6,000,000 handsets before March-end. That is broadly consistent with what Counterpoint Associates Director Sujeong Lim predicted.
Still, Lee at Eugene Investment & Securities, expects the GOS furore to combine with increased component costs to leave April-June operating profit at Samsung’s mobile arm at 3 trillion won, down from a previous forecast of 3.4 trillion won.
IBK Investment & Securities analyst Kim Un-ho also downgraded his forecast to 3 trillion won from 3.5 trillion won.
Samsung announced Thursday that it expected to report a 50% increase in its overall January-March operating profits on April 28. This is due to strong demand for its memory chip products.
The reviewers noted that the S22’s lowest price showed it lacked the vapour chamber, which is a cooling element. This could have led to increased reliance upon software for overheating.
Analysts claim that the trend toward software solutions results from an increased focus on cutting costs. They believe this strategy erodes your reputation for being innovative and a stronghold in hardware.
Lee claimed that Samsung is putting too much emphasis upon cutting costs. Which led to this sad case.”
A class action lawsuit was filed by 1,885 consumers alleging that Samsung’s marketing inflated the S22’s performance.
Would you buy a Porsche if it had a 100 km/h speed limit (62 miles/hr)? Kim Hoonchan (the lawyer representing consumers) said that about 1,500 people had joined the class-action lawsuit.
($1 = 1,218.4000 won)