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Samsung's haste to release foldable ahead of Huawei backfires

South Korean company had hoped to jump-start market with Galaxy Fold and 5G

SEOUL/GUANGZHOU -- Samsung Electronics' quality control is under the microscope again with the delayed launch of folding-screen smartphone over fragile displays, an unwelcome follow-up to the Galaxy Note 7 battery fires of 2016.

The Galaxy Fold was set to begin sales in the U.S. this coming Friday, with a 5G version to hit South Korea later. But on Tuesday, Samsung said it would now announce the new release date "in the coming weeks" following reports of malfunctions by some reviewers.

The Fold's problems could be attributed to the haste with which Samsung tried to release the new product -- ahead of Chinese rival Huawei Technologies. With smartphone shipments having fallen for two consecutive years, Samsung was eager to leverage the launch of the next-generation product and 5G services to jump-start the market. But now the company will have to rethink its strategy. 

The postponement stems from U.S. media reviewers' reports of foldable displays breaking. This was originally blamed on the accidental removal of the protective layer, but reports of more issues without removing it emerged soon after, shaking confidence in the company.

"While many reviewers shared with us the vast potential they see, some also showed us how the device needs further improvements that could ensure the best possible user experience," its statement said.

The Fold has a 4.6-inch OLED screen when folded and a larger, 7.3-inch one when unfolded, which was "the most difficult component to develop," a company executive said.

Samsung claimed that the Fold's display could withstand 200,000 folds. But "the company may have relied too much on inspection equipment and made light of human evaluations," an analyst in South Korea said.

The smartphone maker sustained serious damage to its reputation in 2016 when customers reported the incidents of the Galaxy Note 7's batteries catching fire. The phones were banned on flights in a major embarrassment to the company, which lost billions of dollars recalling those phones, compensating retailers and investing in prevention policies.

This time, Samsung's quick admission of the problem can limit "the impact on earnings," said another analyst, echoing a widely shared sentiment. Even if Samsung hit its sales target for 2019 of 1 million units, the Fold would still generate just 2% of the information technology and mobile segment's revenue.

But reputational harm is unavoidable. Koh Dong-jin, who runs the information technology and mobile communications business, pledged to "thoroughly strengthen convenience and safety for customers" around the time of the 2016 Galaxy Note 7 recall. Without an effort to get to the bottom of the problem and offer a thorough explanation this time, consumer distrust of Samsung could persist. 

"This is a shock because the product was expensively priced at [the equivalent of $2,000] per device," a source close to Samsung said. "It will raise concern about the feasibility of this product."

Samsung's determination to beat rival Huawei to the punch could have contributed to the problem as the Chinese company rushes to bring a foldable smartphone to the market. Operating profit for Samsung's IT and mobile segment fell about 30% for three consecutive quarters on the year through the October-December period as Huawei turns Samsung's duel with Apple into a three-way race. The market share gap between the top three players had shrunk to within 3 percentage points by smartphone shipments in the October-December quarter, according to U.S. research company IDC.

The importance of smartphones will grow further as data collection devices in the 5G era. Tablet-sized smartphone displays offer the foundation to create richer content for both consumers and business users. Samsung hoped to sell its new products as 5G-enabled devices in South Korea to get ahead of Huawei and Apple.

"Samsung decided on an unrealistic sales date to beat Huawei," an analyst in South Korea said.

Huawei is not without its potential problems as Chinese media outlets report that the company may also delay the launch of its foldable Mate X -- highlighting the difficulty of developing these smartphones.

The Mate X works like typical smartphone when folded and becomes a tablet when opened. Sina Technology said Tuesday that the device's launch may be postponed until September because of quality issues at panel supplier BOE Technology Group but added that a Huawei insider denied the report.

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