Samsung Galaxy S7: Make Or Break For World's Biggest Smartphone Maker

Samsung is battling companies like Apple, Huawei, LG and Xiaomi as it seeks to remain the biggest smartphone maker in the world. But more importantly it is battling itself: the company has released a dizzying 30 new smartphone models over the past year, so the challenge is getting users to upgrade from one Samsung phone to another.

The company will launch its latest flagship – the Galaxy S7 and Galaxy S7 edge – on Sunday at Mobile World Congress in Barcelona and then will spend billions marketing them to its own customers, attempting to persuade the millions of Samsung smartphone owners to upgrade.

“Samsung is starting from a leadership position in the smartphone market, which means that for the bulk of consumers who are upgrading, Samsung is really competing with its previous- year models,” Ian Fogg, head of mobile analysis at research company IHS Technology, told International Business Times.

Samsung is currently the world’s biggest smartphone maker, shipping more than 324 million smartphones and holding a market share of 21.4 percent in 2015, according to figures from market research company IDC. But its share of the market has been in decline for the last three years, from a high of 32.2 percent in the second quarter of 2012.

Increased pressure from number-two player Apple at the premium end of the market has hurt, but more significant is the erosion of its sales at the mid-to-low end of the market. That's where huge competition from Chinese smartphone brands has seen Samsung’s once- unassailable lead almost erased.

Therefore, it's high stakes as Samsung gets set to roll out the Galaxy S7 line.

“This is definitely one of the most high-pressured launches in recent times,” Imran Choudhry, mobile analyst with Worldpanel ComTech, told IBT. “[They] really have to get it right with their upcoming flagship devices."

Figures released this week by IDC show just how Samsung’s star has fallen. In the world’s biggest smartphone market, China, where Samsung once topped the list, the company is no longer even listed among the top five sellers. It has been pushed out by big local manufacturers like Huawei and Lenovo, as well as relative unknowns like Vivo and Oppo, who are offering premium hardware at budget prices.

“2016 is going to be another tough year. Samsung has to execute perfectly, if it makes a mistake it will hurt because the competition is fierce,” said Fogg.

Galaxy S7

The smartphones that Samsung will hope can entice people to upgrade will be the Galaxy S7 and the curved-screen Galaxy S7 edge. Both are iterations of last year’s Galaxy S6 models, which were a significant redesign of Samsung’s flagship series. From the many leaked pictures, renders and videos of the devices, it seems clear that Samsung won’t be using design to tempt its customers to upgrade.

The iPhone launch in 2007 brought huge innovation, and competition, to the smartphone market, which led to a regular and fast-paced upgrade cycle. In recent years, as devices have become ever thinner, lighter, faster and feature-rich, that innovation has slowed. It's now much harder to get someone using a 12-month-old smartphone to update to the latest model – there simply isn’t a compelling reason to do so in many cases.

There are, however, a couple of areas where consumers are still seeking something better, notably in terms of camera performance and the robustness of the device. "We know that consumers care about the camera, we know that the camera is still something where the smartphone lags behind the best of the standalone cameras and there is room to improve – particularly in low-light performance and fast-moving action,” Fogg said.

Samsung is set to address at least one of these concerns with the camera in the Galaxy S7, with a teaser website for the device bearing the slogan “Bringing light to the night” below an image of a camera lens. Samsung is also set to address robustness by making the Galaxy S7 smartphones water-resistant, as a leaked promotional video seems to confirm.

Gear VR

But these incremental changes are unlikely to persuade a Galaxy S6 owner to pay for a brand- new phone. Samsung does have another trick up its sleeve, but it remains to be seen if it will use it to full effect — its Gear VR virtual-reality technology. “The thing that is striking about the Gear VR – and VR in general – is that it is new and it is sexy, and Samsung would be smart to use it as an acquisition driver, to persuade consumers to switch up the latest handset,” Fogg said.

Samsung announced its Mobile World Congress press conference by publishing a video prominently featuring its Gear VR headset, suggesting that the company would at least be talking about its virtual-reality efforts. Just like the smartwatch explosion the industry experienced in 2014 and 2015, this year is likely to see a lot of smartphone manufacturers jump on the VR bandwagon in the same way.

Samsung has an advantage in that it already has a product in the market and the company clearly sees the Gear VR as a revenue driver as well as a way of keeping customers tied into the Galaxy eco-system (the headsets only work with Samsung’s premium devices). If the Galaxy S7 is to help Samsung turn around its fortunes, Fogg believes the company needs to leverage VR.

“If [Samsung] can find some experience that they can make the S7 particularly compelling when paired with a VR device, that could help them drive S7 sales, and that is what Samsung needs to be doing with VR,” he said.

A report last week suggested Samsung could give those preordering the Galaxy S7 a free Gear VR headset, but Fogg doubts this. “It’s not like a Google Cardboard device that is basically a couple of lenses and a bit of cardboard or plastic, it has got actual electronics within it,” he said.

Without a killer app like VR, it's unlikely that the Galaxy S7 will be the savior of Samsung. “I think these new devices [Galaxy S7 and Galaxy S7 edge] will help keep sales flat, and help to stem the decline rather than add incremental sales, “ WorldPanel's Choudhry told IBT. “As a result, a recovery in 2016 looks pretty slim.”