Apple appears to the be the primary beneficiary of the Samsung Galaxy Note 7 recall blunders, with replacement devices also prone to catching fire which eventually resulted in the company cancelling production of the Note 7 entirely. This means Note 7 customers have no choice but to choose another type of phone. Obviously, Samsung hopes customers will flock to one of its other phones (like the Galaxy S7) but a report from KGI believes that Apple and Android manufacturer Huawei will be the biggest benefactors.
Ming-Chi Kuo estimates that 5-7 million ex-Note 7 orders will convert into iPhone 7 sales, predominantly iPhone 7 Plus thanks to the dual camera. KGI says Note 7 users will have lost faith in the Samsung brand and have a tendency to like iOS and camera features, making the new iPhone an attractive sale.
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The report explains that this intersection of users have shown little loyalty to a particular manufacturer and will be easily swayed to make the jump to iOS with many having previous experience with iPhone devices. Obviously, this is largely speculative as it is hard to predict how customers will react. Some Note 7 owners are refusing to even return their current devices, due to exclusive features like iris biometrics detection.
That being said, Apple is well positioned to capture this market. Out of approximately 12 million Note 7 orders, KGI claims Apple will be able to reap about 50% of the customers with the rest being shared amongst Android manufacturers like Huawei. It is also worth noting that the ‘Google Phone’, the new Pixel, is currently out of stock and a very good choice for ex-Samsung customers.
AAPL company stock has steadily risen in the past month, with some of the increase accountable to the catastrophic launch of the Samsung Note 7. KGI says that the impact of the Note 7 failings will not be protracted beyond a couple of months but warns another round of similar faults would destroy the Samsung brand as a top-of-the-line phone manufacturer. Apple should see upside in the fourth quarter of 2016 as well as early 2017.
The iPhone maker will report earnings results to investors next week on October 25, which includes initial round of iPhone 7 and iPhone 7 Plus sales. Investors have become more bullish about iPhone 7 sales as time has gone on although many are still not expecting a record revenue quarter for Apple.