Samsung woes may benefit local brands

A woman looks at her mobile phone as she rides an escalator past an advertisement for Samsung's Galaxy Note 7 device at a Samsung store in the Gangnam district of Seoul on Tuesday. [Photo/AFP]

Domestic demand for high-end Chinese smartphones could get a big boost after Samsung Electronics Co decided to recall all 190,984 Galaxy Note 7 phones that it has sold on the Chinese mainland, analysts said.

China's product quality watchdog said on Tuesday that Samsung will recall the phones, including the 1,858 early-release Note 7 smartphones that the watchdog ordered recalled on Sept 14.

Users may replace their recalled phones with other models of Samsung's smartphones or get a full refund, China's General Administration of Quality Supervision, Inspection and Quarantine said on its website. It said there have been 20 cases involving overheating and fire related to the Note 7 on the Chinese mainland.

The recall is widely expected to benefit domestic high-end smartphone makers such as Huawei Technologies and ZTE Corp, which have speeded up efforts to launch new products.

James Yan, research director at Counterpoint Technology Market Research, said that "some customers may turn to the newly launched Apple Inc's iPhone 7 and 7 Plus, and other customers may choose Huawei's Mate 9, a high-end smartphone that is expected to be sold in November. Moreover, the sales of ZTE's flagship Axon 7 will also benefit."

Yan added that the recall's impact on Samsung's brand image could affect sales of its medium- and low-end phone products as well, and Oppo Electronics Corp and Vivo Mobile Communication Technology could seize the opportunity.

Samsung's shares plunged by 8 percent on Tuesday, the largest intraday drop since the financial crisis in 2008. South Korea's KOSPI Index dropped by 1.21 percent.

Samsung China released a statement on Tuesday afternoon, apologizing to Chinese consumers over the safety of its Galaxy Note 7 smartphones and saying it had decided to stop selling the Note 7 and to recall all of those sold on the Chinese mainland.

Jason Low, a tech industry expert at Canalys, said that "Samsung expects to retain Chinese consumers, especially the high-end smartphone users, and reduce the negative impact on the brand through recalling all Note 7 phones sold in China."

"Smartphone manufacturers will strengthen the quality and safety control of their suppliers and improve product quality," Low added.

Earlier on Tuesday, the South Korean tech giant halted global sales of its Galaxy Note 7 smartphones and told owners to stop using them while it investigates reports of fires in the devices.