At the start of April, the situation was looking a little dire for Apple (NASDAQ:AAPL). The iPhone — already a cause for concern with slowing global smartphone demand — was in serious danger of being left behind by the Android competition. As its fight with Qualcomm (NASDAQ:QCOM) dragged on, there were distressing signs Apple would be without 5G support for several years. To make things worse, Samsung was releasing the Galaxy Fold and threatening to leave the iPhone in the dust as yesterday’s ancient design.
What a difference those few weeks have made. The company settled with Qualcomm and will get its 5G modems in time for next year’s iPhone. And in the latest bit of good news, Samsung has now officially delayed the release of the Galaxy Note. Since the start of April, Apple stock has gained nearly 7%, reflecting increased confidence in its ability to keep selling iPhones.
Samsung Delays the Galaxy Fold Release
Galaxy Fold pre-orders are scheduled to ship at the end of this week, and tech publications were supplied with review units in advance of the big day. Buzz around the first folding smartphone to get a wide-scale commercial release brought to mind the glory days of five years ago when people still got excited about smartphones. Samsung had no doubt been expecting to put out a triumphant press release highlighting the device as the next big step in the evolution of smartphones — something that would make Apple’s flagship iPhones look pedestrian and outdated.
Instead, the narrative took a different direction, with prominent reviewers posting about Galaxy Folds that broke after just a day or two of use. After initially trying to discount the issues as being limited to a few review units and insisting the April 26 launch would still happen, Samsung has now called it off. The Galaxy Fold launch has been delayed while the company’s engineers try to figure out a fix.
Samsung released a statement to CNBC announcing the postponed launch:
“We are encouraged by the excitement around the Galaxy Fold. 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. To fully evaluate this feedback and run further internal tests, we have decided to delay the release of the Galaxy Fold. We plan to announce the release date in the coming weeks.”
Samsung’s Loss Is Apple’s Gain … And Possibly Huawei’s
Samsung’s Galaxy Fold was meant to be a public relations coup. The folding smartphone, which essentially combined a smartphone and a tablet in a single device, was futuristic and leagues beyond anything Apple has attempted. The new form factor sparked renewed interest in smartphones from consumers, and Samsung was leading the way. Not Apple. And with the $1,980 starting price, the Galaxy Fold was also positioned as a premium priced flagship, significantly more costly than anything Apple offered.
Apple’s iPhone business is critical to the company’s financial health, but it has been struggling of late. 2019 and 2020 were shaping up to be brutal. The notch introduced with the iPhone X was once widely copied but is now derided. 5G cellular service is slowly beginning to roll out this year, but Apple’s legal battle with Qualcomm was raising the specter of no 5G iPhone even in 2020. And with the Galaxy Fold, Apple was seen as losing its design crown. If everything had come together as Samsung planned, the iPhone in 2019 and especially 2020 would have looked like a relic in comparison.
The results would not have been pretty for iPhone sales, AAPL revenue or Apple stock.
Instead, Apple will be releasing iPhones for the next few years that follow the company’s usual approach of incremental improvement, a proven premium design and premium pricing. Thanks to the Galaxy Fold’s very public face plant, lack of a folding display is unlikely to cause potential iPhone buyers to jump ship or balk at the cost. 5G likely won’t be available in 2019, but the support will be there in 2020, when it really matters.
The “X” factor in all this at this point is Huawei. The Chinese smartphone maker also has a folding smartphone due to be released this year, the Huawei Mate X. This one is even more expensive than the Galaxy Fold, and it takes a different approach to the folding screen that just may succeed where the Galaxy Fold has struggled. But with an inability to sell its smartphones in the U.S. — and a lower profile with American consumers — the Huawei Mate X is unlikely to hurt iPhone sales the way the Galaxy Fold could have. But a successful Mate X would make the Galaxy Fold situation much worse for Samsung, and fuel Huawei’s push to topple Samsung as the worlds largest smartphone company.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.
