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Amid downturn, Apple, Samsung scramble to contain recent woes

TAIPEI/SEOUL -- Recent troubles at Apple Inc. and Samsung Electronics are exacerbating conditions in the weak smartphone market, already dragged down by saturation and global economic uncertainties.

After Apple confirmed the removal of the head jack in handsets and introduced wireless earbuds for the new iPhone 7 and iPhone 7 Plus at a launch event on Wednesday, many expressed disappointment on Twitter and mocked Apple executive Phil Schiller's attempt to describe the move as courageous. A major selling point for the new model is a dual-lens camera for iPhone 7 Plus, which analysts said was not nearly interesting enough to lure buyers.

"The iPhone 7 is unexciting and will face competition from vivo, OPPO and Huawei in China," said Arthur Liao, an analyst at Taipei-based Fubon Securities, in a note on Thursday. Liao added that the $159 price tag for the new cordless AirPods is "not cheap."

Analysts forecast that Apple will ship about 201 million to 204 million iPhones this year, down from 231 million last year.

Research company IDC lowered estimates for global smartphone shipments in 2016 earlier this month. It said total smartphone sales this year will reach 1.46 billion units, up just 1.6% from 2015. It is a drastic slowdown from last year, when the smartphone sales volume managed to grow 10.4%, according to IDC data.

On Thursday, shares of major Taiwanese suppliers to Apple fell following the launch event.

Taiwan Semiconductor Manufacturing Co., which supplies the core processors for iPhone 7, closed at 183 new Taiwan dollars, down 0.54%. Key iPhone assembler Hon Hai Precision Industry shed 1.26% at NT$78.5, while its smaller rival Pegatron closed flat at NT$77.2. Camera lens maker Largan Precision fell 0.94% to NT$3,685.

Apple suffered the first year-over-year decline in quarterly revenue in 13 years in the January-March period due to weakening demand for iPhone 6s and iPhone 6s Plus.

The drop extended into the April-June period, with the greater Chinese market posting the worst decline of 33%, due in part to local rivals offering cheaper handsets.

Apple's struggle to deliver an innovative groundbreaker as Tim Cook celebrates his fifth year as the chief executive of the California-based company is leaving the field wide open for Samsung to establish itself as the smartphone tech leader. It has indeed introduced unique advanced organic light-emitting diode panel technologies that enable it to produce curved screens.

Samsung's two new premium smartphone models with curved screens, Galaxy S7 Edge and Galaxy Note 7, both garnered rave reviews initially with their sleek designs. But the South Korean conglomerate bungled its opportunity to overtake Apple when a string of Galaxy Note 7 batteries exploded around the world shortly after the model's August launch.

The faulty components were supplied by Samsung SDI, an affiliate of the Suwon-based conglomerate, which provided about 70% of all the batteries for Note 7.

While Samsung is in the process of recalling Galaxy Note 7 handsets worldwide, Koh Dong-jin, head of the company's mobile business, said on Sept. 2 that it would take two weeks to deliver new units.

Analysts say that costs for the recall of 2.5 million smartphones in 10 countries - of which 1.45 million devices were sold and 1.05 million held by retailers -- could come in between $1.42 billion and $1.75 billion.

Adding to Samsung's woes, the U.S. Federal Aviation Administration is now considering a ban on Note 7, tech website Gizmodo reported on Wednesday.

There is a silver lining for Samsung though. Its swift response to the incident has generated positive market reaction, with Samsung shares closing at 1,639,000 won on Thursday, up 1.11%. It has climbed 3.3% from Sept. 1, one day before the company's recall announcement.

Industry sources said that the South Korean technology giant is no longer relying on Samsung SDI to supply batteries for Note 7. Meanwhile, Apple also lists Samsung SDI as an official supplier, although the South Korean company declined to say whether it was producing battery cells for iPhone 7 and iPhone 7 Plus.

South Korean media reported that Samsung employees had pressured executives to recall Note 7 to regain customers' trust for the company.

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