Smartphone vacuum benefits LG

Mr. Jung, a 43 year-old office worker, bought a Samsung Gear S3 smartwatch on Saturday. His original plan was to change his phone around this time, but after Samsung pulled its Note7 phablet from the market, he didn’t know what to buy.

“I’ve been familiar with the Android operating system (OS) for years, so I’m not completely comfortable shifting to Apple,” he said. “For now, I decided to console myself with a smartwatch and wait for new smartphones to be released next spring.”

The failure of the Note7 put a hole in the market that hasn’t been fully filled.

“November is usually a profitable month, but sales aren’t usual this year,” said an employee at the Dokok-dong, southern Seoul, branch of mobile carrier SK Telecom. “The release of the iPhone 7 and LG Electronics’s V20 made the situation a little better than September and October, when the Note7 models were being recalled. Christmas is coming and it’s a pity we don’t have a wide selection of new models to offer.”

Apple and LG are getting mixed reviews for how they benefitted from the failure of the Note7. Both unveiled models in early October, not long after Samsung Electronics recalled its trouble-plagued model.

It seems that Apple’s iPhone 7 and iPhone7 Plus weren’t as successful in exploiting Samsung’s stumble, while LG’s V20 made the most of the vacuum in the market.

The iPhone 7’s global sales for the fourth quarter will be released next year. But market research institution’s estimates on Apple’s share in the domestic market and comments from industry analysts are already bending towards the opinion that the early fever, which used to last for some time after release in the case of previous iPhone models, are calming down much faster than expectations.

The Washington-based consulting firm Atlas Research and Consulting said that the market share in Korea of the iPhone 7 between Oct. 27 and Nov. 2 shrank to 28.4 percent, down 17.5 percentage points from the previous week. Samsung’s Galaxy S7 rose 5.8 percentage points to 17.4 percent during the same period.

Although the iPhone 7 is selling better compared to the disappointed reactions it received just after its release, industry insiders say it is not profiting at its fullest from Note7’s failure. Kim Dong-won, an analyst at Hyundai Securities, pointed out the “barrier of operation systems” as an influence. “Smartphones have been around almost ten years now, meaning that each Android and Apple users have become so familiar with their operation systems that nowadays they are more reluctant to shift between OS,” he said. “This explains why the iPhone 7 couldn’t completely absorb all of Note7’s potential buyers this time.”

The delayed release of the iPhone 7’s wireless earphones, Airpods, is said to be another unfavorable factor for Apple. The original release was scheduled to be by the end of October, but the company postponed its release that month, citing the need for more preparation.

Ming Chi Kuo, the KGI Securities analyst with a specialty in predicting Apple’s sales, stated in his recent report that iPhone 7 sales will go down much faster than iPhone 6: “iPhone 7 sales for the first quarter of 2017 are foreseen to post between 40 and 50 million units, slipping to about 35 million and 40 million units in the year’s second quarter.” The iPhone 7’s shipments for this year’s second half were 40.4 million units. He added that sales for the 4.7 inch screen models were low and that results from China, the company’s biggest market, weren’t that successful.

On the other hand, LG Electronics, whose smartphone sales were significantly low compared to Apple and Samsung until this year’s first half, seems to be relieved with this year’s unexpected chance. “V20 sold over 200,000 units in the first ten days of release in the U.S. market,” the company announced Sunday. Having started release in the U.S. in Oct. 28, this means the V20 sold an average of 20,000 units per day, double from its previous V10 model of the same line.

Market analysts say the removable battery and Android OS system helped the model appeal to potential Note7 buyers. The company hired American celebrities such as the actor Joseph Gordon-Levitt and singer Shawn Mendes as a strategy for the U.S. market. “LG Electronics’ decision to concentrate on the U.S. market while giving up on other foreign markets was a good strategic move,” assessed Jeong Chang-won, an analyst at Nomura Securities.

On the other side, Samsung Electronics is trying to fill the empty gap of new releases caused by the loss of Note7 by pushing forward the S7 Edge Blue Coral edition. The new color was added to the line last week. Noh Geun-chang, an analyst at HMC Investment and Securities expressed skepticism on the idea, saying “S7 is a nine-month old model which means now is a little too late to create a boom with a new color.”

He added that “Consumers waiting for next year’s new smartphone models are piling up.”

BY LIM MI-JIN, KIM KYUNG-MI [song.kyoungson@joongang.co.kr]