The big winner in the wake of Samsung's Note7 disaster

Daniel Howley
Technology Editor
Dan Howley
Samsung's Galaxy Note7
Samsung’s Galaxy Note7.

Samsung’s Galaxy Note7 is dead in the water. First, the company had to recall the highly anticipated handset because it tended to catch fire. Then the replacement Note7 devices Samsung shipped to intrepid customers who still wanted a big-screen Samsung phone … started catching fire.

The end result: Samsung has dropped the Note7 like a hot rock. For Samsung the Note7 debacle has been nothing short of disastrous. Adding to the company’s embarrassment is the fact that it now must ship fireproof boxes to customers who want to return their Note7s.

Samsung’s loss, though, will certainly be someone else’s gain. But it might not be the company that you’d first expect. In the US, Samsung is the second most popular smartphone brand, making up 28.4% of the market as of February 2016, according to comScore’s numbers.

Apple takes the No. 1 spot with 43.9% of the market share.

The operating system matters

Now, it would seem to make sense that more consumers would move from the Note7 to Apple’s iPhone 7 Plus, since they are around the same size and equally popular among shoppers. But there’s more to a smartphone than who makes the hardware. The operating system, the software that you actually interact with when using your phone, is far more important than a handset’s hardware.

In the US and around the world, more people use Android than iOS, and they will probably want to stick with those operating systems, too. Think about it. If you use an iPhone, you keep your contacts and all of your photos and videos stored in iCloud. You buy your music through iTunes and purchase apps through Apple’s App Store. If you’re an especially dedicated user, you might also have accessories that will only work with your handset and nothing else. Well, that same logic works for Android-based phones like the Note7.

If you bought a Galaxy Note7 or were thinking of upgrading to the Note7 from an existing Android device, you’ve already got all of your contacts stored in Google Drive, along with your photos and videos. You rely on Google Now to provide you with calendar updates and notifications, and you’ve probably bought a number of apps through the Google Play Store.

Sure, Apple offers its Move to iOS app to help you transfer all of your content from your Android device to your new iPhone, but it’s still a hassle. Not only are you essentially wasting money you spent on apps, but if your new iPhone is your first, you also have to learn an entirely new and unfamiliar operating system.

Google’s gain

So if Apple isn’t going to benefit from Samsung’s missteps, then who will? Android smartphone makers, that’s who. In the US that means Google, which will soon launch its Pixel and Pixel XL smartphones and could see an unexpected bump in sales. The Pixel XL sports a 5.5-inch display that’s fairly similar to the Note7’s 5.7-inch panel.

LG and Lenovo’s Motorola may also see a boost, as well. That’s if customers decide to even switch from Samsung entirely and don’t simply purchase a Galaxy S7 or S7 Edge. Overseas, competitors like China’s Huawei and Oppo, the world’s No. 3  and No. 4 smartphone makers, according to IDC Research, could also take advantage of Samsung’s failure.

Samsung’s hit

Killing the Note7 will undoubtedly put a financial strain on Samsung. According to Reuters, analysts expected the company to sell upwards of 19 million Note7 devices, resulting in $17 billion in revenue. With the death of the Note7, though, that’s all gone out the window and Samsung has had to cut its Q3 2016 profit estimates by $2.3 billion.

The Note7 is a blow to Samsung, but it’s hard to imagine it will have an enormous impact on the company’s global dominance. Sure the S7 and Note7 are, or at least were, the tech giant’s premium devices, but Samsung sells a host of low-cost handsets throughout the world — especially in emerging markets.

What matters most is how Samsung handles the fallout from the Note7 controversy. If the company manages to smooth over relations with customers and put the issue in its rearview mirror in short order, Samsung shouldn’t take as hard of a hit as some experts may suggest.

If, however, the company has a repeat of the Note7 fiasco when it releases its next smartphone, which will presumably be the Galaxy S8, then Samsung might have to say goodbye to its title as world smartphone king.

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Email Daniel at dhowley@yahoo-inc.com; follow him on Twitter at @DanielHowley.