Demand for new Galaxy surprises Samsung
SAMSUNG Electronics' struggle to keep pace with rampant demand for its new Galaxy S III smartphone may have cost the South Korean company 2-million units of sales in just a month.
For a company that has never stirred the sort of consumer frenzy that accompanies each new Apple gadget, overwhelming demand is a nice problem to have. But some of the shortage stemmed from a manufacturing glitch that affected some European sales, while major carriers in the US have had to delay delivery of some pre-ordered phones.
The Galaxy S III has received the most positive reviews among any of the Samsung smartphones, and the technology giant says the phone is on track to become its fastest-selling smartphone, with sales likely to top 10-million in the first two months since its launch.
The latest Galaxy's launch has been well timed as the next iPhone is not expected until later this year, and offerings from others such as Google's Motorola and Nokia have not created much of a market stir.
"Samsung might have been caught off guard by the demand, not because they did not believe in their own products, but because they might have overestimated the competition," says Gartner analyst Carolina Milanesi. "In other words, aside from the iPhone and HTC's oneX there's not much out there at the moment, which would have certainly helped Samsung."
Analysts reckon the Galaxy shortage will be a temporary hiccup, affecting 2-million units of shipments in the April-June quarter.
Samsung expects another record quarter of earnings from its handset business in this period, helped by solid sales of its predecessor S II and phone-cum-tablet Galaxy Note.
Barclays lowered its forecast for the second-quarter Galaxy S III shipments to 6,5-million from 8-million, but raised third-quarter shipment forecast by 1-million to 15-million. Samsung says component shortages have been resolved and it is running at full tilt to meet demand. "It is simply that demand far exceeded our expectations. But that doesn't mean we had set a very conservative demand forecast," Samsung says.
Samsung began global sales of the Galaxy S III on May 29, but immediately signalled a delay of two to three weeks for delivering the pebble-blue version of the model.
Less than a fortnight before launch, Samsung's then CEO, Choi Gee-sung, now head of parent Samsung Group's corporate strategy office, ordered that half-a-million of the blue cases be thrown away as the design, with thin, silver stripes, was unsatisfactory, according to daily newspaper Chosun Ilbo.
After numerous design tweaks, Mr Choi approved the final version less than 10 days before launch, the report said - as he was boarding a plane to fly to a court-ordered meeting in the US with Apple CEO Tim Cook as part of a long-running patent dispute between the two smartphone powerhouses.
Samsung said yesterday that delays caused by the blue-case problem were a temporary blip and had been resolved, adding that a supply shortage in the US was rapidly getting back to normal.
In the US, where sales were launched last week, major carriers including Sprint Nextel and AT&T struggled to deliver pre-ordered smartphones. Sprint said on its website that both the 16GB and 32GB models were out of stock, and an AT&T spokesman said future orders would arrive within 10 business days based on available supplies.
Samsung launched its first Galaxy two years ago in a bid to counter Apple's iPhone success. At the time, Samsung's global smartphone market share was below 10%. It has since overtaken Apple, and the company said in April that the new Galaxy would "substantially contribute" to second-quarter results.
Samsung sold 44,5-million smartphones in January-March, and this quarter's sales are expected to top 50-million.
"It's increasingly apparent the Galaxy S III is being considered a true peer to the iPhone, rather than simply the least-bad alternative," says CLSA analyst Matt Evans.
"The change in status is most evident in the uniformity of the device among the five US carriers. Unlike the Galaxy S II, there's little customisation. Samsung has obviously huge leverage in negotiations with carriers and has created a 'must have' handset."
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