Samsung launches Galaxy Note 7 as it targets Apple users looking for an upgrade
Samsung (: 593'A-KR)unveiled the large-screen Galaxy Note 7 "phablet" with a stylus pen on Tuesday, in an attempt to capture the premium end of a slowing smartphone market, boost profits and poach customers from rivalApple (NASDAQ: AAPL).
Samsung's Galaxy Note 7 has a number of key features taken from the S7 and S7 Edge – its flagship smartphones. The key features include:
A slightly curved 5.7-inch display
S Pen stylus
Retina scanner to unlock the phone with your eyes as well as fingerprint scanner
Water resistant display and S Pen
Support for High Dynamic Range (HDR) video streaming. Images shot in HDR essentially make the contrast between light and dark colors even more prominent so the white highlights are even brighter. The purpose is to make the image on screen look more realistic. It's one of the first phones to support this.
12 megapixel rear camera and 5 megapixel selfie camera
A 17 percent increase in battery capacity versus the Note 5
Expandable storage up to 256 gigabytes
Edge display – the same as the Galaxy S7 Edge
The last Note device, the Note 5, came out in 2015 . Samsung skipped the Note 6 in order to bring the handset in line with its flagship S7 models. The Note '"phablet" was a category Samsung has been credited with creating when it launched the first version in 2011. It accounts for around 6 percent of the company's total smartphone shipments, but analysts said it is an important device because it's one Samsung can make a larger margin on.
Margins have come under pressure in the low-to-mid-end of the smartphone market where Chinese players have been able to bring high-spec but low-priced devices to market. At the same time, the overall smartphone market has been slowing. Samsung has been focusing on winning in the premium smartphone space where it competes again the likes of Apple and Huawei.
"What we're finding…is the premium end of the smartphone market is the part that's growing. So we took a strategic decision to focus on the premium segment with the…S6 and S7 series…and they have done incredibly well for us and put real momentum into our smartphone business again," David Lowes, chief marketing officer for Europe, told CNBC in an interview ahead of the launch.
Following this shift in focus, operating profit in its IT and mobile communications division – of which smartphone sales are a large chunk – were up 56 percent year-on-year in the second quarter of 2016, helped by raising the sales proportion of the Galaxy S7 Edge to over 50 percent of shipments.
Analysts said the release of S6 and S6 Edge in February 2015 marked a turnaround in Samsung's smartphone business, which had struggled after the S5 was met with lukewarm reception. The S7, S7 Edge and Note 7 have continued that process and the company considers it is now in a position to challenge Apple, something that it has struggled with previously.
"Users recognize that they now have a premium device that can stand up against the iPhone and that's what Samsung needs to do, they need to keep their customers loyal," Francisco Jeronimo, research director for mobile devices in Europe at IDC, told CNBC by phone.
"Before the S6, people who moved from Apple to Samsung, went back to the iPhone because they were not happy with the experience and value they were getting for the price they were paying. That changed with the S6 and S7 and now with the Note 7 and that will bring a good result for Samsung in the long term because they need to be a premium brand."
Samsung's Galaxy Note 7 launch comes as Apple is slated to release the iPhone 7 next month. Apple has itself been struggling with declining iPhone sales which fell in its latest quarter and some investors have expressed concern that its next flagship smartphone will be underwhelming.
Analysts said this could be a chance for Samsung to capture those users currently on an iPhone 6 or lower and looking to upgrade.
"It does seem like if Samsung gets it right, it has a chance to really make a dent into that high end segment which it has really been struggling to do against Apple for several years," Daniel Gleeson, senior consumer technology analyst at Ovum, told CNBC by phone.
Samsung also took the wraps of an upgraded GearVR headset – its virtual reality headset which is compatible with its latest device.
It's not much different from the current product except that it has a slightly wider field of view and the color has been changed to a shade of blue-black so it doesn't reflect light, which could interfere with the experience.
Virtual reality has become a major focus for Samsung since it launched the headset in 2015, and the Gear 360 – a camera with the ability to film 360 degree content – earlier this year. It's a market that is forecast to see explosive growth and Samsung is trying to become a leader early. Devices like the GearVR, Gear 360 and its wearables are aimed at diversifying its revenues beyond just smartphones and are key for keeping users plugged into the Samsung ecosystem, analysts said.
"If they bring VR and become leaders, or bring services like Samsung Pay that is different from Apple Pay, and they expand their wearables and if they keep developing new areas, that's the kind of innovation that will differentiate and attract users from Apple in the future," Jeronimo said.
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