TAIPEI/SEOUL Troubles at Apple and Samsung Electronics are deepening the gloom in the smartphone market, which is struggling to cope with saturation and global economic uncertainty.
After Apple's Sept. 7 launch event for the iPhone 7 and iPhone 7 Plus confirmed the handsets would not have headphone jacks, many expressed disappointment on Twitter. Some mocked Apple executive Phil Schiller's description of the shift to wireless earbuds as courageous.
Analysts, meanwhile, said the dual-lens camera in the 5.5-inch iPhone 7 Plus -- supposed to be a major selling point -- is unlikely to lure buyers in droves.
"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 Sept. 8. Liao added that the $159 price tag for the new cordless AirPod earphones is "not cheap."
For Tim Cook, who just completed his fifth year at Apple's helm, the projections are nothing to celebrate. Analysts forecast that Apple will ship about 201 million to 204 million iPhones this year, down from 231 million last year.
Research company IDC earlier this month lowered its estimates for global smartphone shipments in 2016. It now projects total smartphone sales will reach 1.46 billion units, up just 1.6% from 2015. This would be a drastic slowdown from last year, when sales volume grew 10.4%, according to IDC data.
For the January-March period, Apple suffered its first year-on-year fall in quarterly revenue in 13 years, amid weakening demand for the iPhone 6s and iPhone 6s Plus. The drop extended into the April-June term, with the greater Chinese market posting the worst decline of 33%, due in part to local rivals offering cheaper handsets.
As Apple stumbles, some of its suppliers are slipping.
Shares of key iPhone assembler Hon Hai Precision Industry, also known as Foxconn Technology Group, have shed 3.8% since the beginning of this year. Foxconn's revenue from January to August dropped 4%, lagging significantly behind founder and Chairman Terry Gou's goal of 10% growth. Apple accounts for more than 50% of the Taiwanese contract manufacturer's revenue.
The stock of Taiwan's Catcher Technology, which supplies iPhone casings, has lost 13.4% since the beginning of 2016.
On the other hand, a combination of Apple tech upgrades and Chinese demand is keeping certain iPhone component makers in good spirits.
Taiwan Semiconductor Manufacturing Co., the sole supplier of the A10 chip for the iPhone 7 and iPhone 7 Plus, saw its share price hit a record high of 185 New Taiwan dollars in intraday trading on Sept. 7. It helps that TSMC also supplies chips to Chinese smartphone brands such as Oppo and Vivo, which are seeing strong domestic demand. Apple accounts for 16% of the chipmaker's total revenue.
In any case, Apple's struggle to deliver a groundbreaker left the door open for Samsung, the handset sales king, to claim the mantle of smartphone technology leader as well.
BURNED Indeed, the South Korean conglomerate used advanced organic light-emitting diode panel technologies to give its two new premium smartphones curved screens. The Galaxy S7 Edge and Galaxy Note 7 both initially garnered rave reviews with their sleek designs.
Yet, Samsung bungled its opportunity. Soon after the Note 7 was released in August, reports of exploding batteries emerged around the globe.
The faulty components were supplied by Samsung SDI, an affiliate of the Suwon-based company, which provided about 70% of all Note 7 batteries. Samsung is in the process of recalling the handsets; Koh Dong-jin, the head of the company's mobile business, said on Sept. 2 that it would take two weeks to deliver new units.
Analysts estimate the cost of the recall -- which affects 2.5 million smartphones in 10 countries -- could be in the range of $1.42 billion to $1.75 billion. A total of 1.45 million of the devices were sold, with retailers holding the rest.
Compounding the damage to Samsung's image, authorities worldwide are treating the Note 7 as a serious safety risk. Aviation authorities in the U.S., Europe, Canada, Japan and India have urged passengers to keep their Note 7s switched off while on board. Further, the U.S. Consumer Product Safety Commission issued a statement on Sept. 9 calling for all Note 7 owners to power down and stop using their devices.
Samsung Electronics shares dropped almost 7% on Sept. 12, to close at 1.465 million won, after the company issued its own notice advising consumers to turn off their Note 7s. "We suggest our customers stop using a Note 7 even before getting a new phone," Samsung said in its statement. "Our top priority is customers' safety and we will implement necessary measures quickly to minimize your inconveniences."
Industry sources said the company is no longer relying on Samsung SDI to supply batteries for the Note 7. South Korean media reported that Samsung employees pressured executives to carry out the recall to regain customers' trust.
An additional wrinkle is that Apple, too, lists Samsung SDI as an official supplier, though the South Korean company declined to say whether it was producing battery cells for the iPhone 7 and iPhone 7 Plus. Apple did not immediately respond to a request for comment.
Analysts at Nomura, in a note issued on Sept. 9, said that while the recall will dent Samsung's profit, the growing strength of its memory and display businesses will more than offset the impact. Samsung is expected to become the sole supplier of OLED panels for new iPhones next year.
Amid the safety concerns, the South Korean company is undergoing changes.
Samsung announced on Sept. 12 that its board approved the sale of its global printing business to HP for $1.05 billion as part of an effort to concentrate on core operations. The same day, the company also announced the nomination of Vice Chairman Lee Jae-yong as a board member, officially anointing him as a decision-maker. In practice, he has been controlling the company for the last two years, since his father, Chairman Lee Kun-hee, was hospitalized after a heart attack in May 2014.
The appointment is to be approved by shareholders next month.