Samsung’s reputation hits as prices drop at home for the Galaxy S22





Samsung Electronics’ flagship Galaxy S22 smartphone has been battered by reports of hampered performance and saw carriers halve its price at home in South Korea just weeks after launch, hurting its image as a rival of the Iphone.

Consumers have complained – and even filed a class action lawsuit – against the handset maker advertising what it called its most powerful smartphone, but with few details about the performance management software they say , significantly slows down the high-end device when using CPU-intensive apps.

These are the complaints the Korea Fair Trade Commission began investigating the world’s largest phone supplier last month.

The controversy is a blow to Samsung’s reputation for high-end handsets – and potentially to its finances – as it tries to make up for two years of premium sales that missed analysts’ estimates and reverse a decline in share Steps.

“The dispute will inevitably deal a major blow to Samsung’s credibility,” said analyst Lee Seung-woo of Eugene Investment & Securities.

At the heart of the complaints is Samsung’s Game Optimizing Service (GOS) which manages device performance during gameplay to prevent overheating and preserve battery life. The manufacturer introduced the software in 2016, just months before it retired its premium Galaxy Note 7 following a series of battery fires.

GOS automatically throttles the handset’s performance during games, but also when using other CPU-intensive apps, said Geekbench, a widely used performance scorer, which found the software slowed the S22’s processor up to at 46%.

The extent to which GOS slows down the S22, the lack of details about the software in marketing materials, and the inability to disable it have set social media on fire.

“This is an unprecedented crazy issue that can in no way be excused,” ITSub, a YouTuber with 2.1 million subscribers specializing in gadgets, said in a YouTube post.

Samsung said it released an update to allow users to disable the software without a security risk. He also said he would continue to invest in innovating both hardware and software.

Price drop

The S22 series hit sales of one million handsets in South Korea within six weeks of release, hitting the mark two weeks earlier than its predecessor, Samsung said.

“The intentional performance degradation has surely had a negative effect, but its actual impact on Samsung’s sales seems limited. The data shows that sales are not greatly affected,” said analyst Kim Ji-san of Kiwoom Securities. .

Still, South Korea’s three major telecom providers nearly doubled subsidies for the S22, pushing its price as low as KRW 5,49,000 (about Rs. 33,880) from a KRW 9,99,000 (about Rs. 33,880) launch. Rs.61,650). Apple’s iPhone 13, released in October, starts at KRW 1,090,000 (around Rs 67,270) with carriers offering smaller subsidies of around KRW 150,000 (around Rs 9,260).

“When subsidies increase simultaneously at the three telecom operators, it is usually the manufacturer who pays the contributions,” said an official from operator LG Uplus, declining to be identified due to the sensitivity of the issue.

Samsung’s 2021 market share in devices over $400 (approximately Rs 33,340) declined by 3 percentage points to 17% from a year earlier, while Apple’s increased by 5 percentage points to 60%, data from market researcher Counterpoint showed. The data also showed that sales of the S20 and S21 were below the Series S first-year standard of 30 million units.

The first shipments of the S22, launched in late February, indicate that Samsung will move more than 6 million handsets by the end of March, which is broadly in line with expectations, said Sujeong Lim, associate director of Counterpoint.

Yet Eugene Investment & Securities’ Lee expects the GOS fury to combine with rising component costs to leave Samsung’s mobile arm’s April-June operating profit at $3 trillion. of KRW (about Rs 18,510 crore), down from a previous forecast of KRW 3.4. trillion (about Rs. 20,980 crore).

Samsung said Thursday it expects to report an estimated 50% increase in overall operating profit from January to March on April 28 as demand for its memory chips remains strong.

Speed ​​limit

Teardowns of the cheaper S22 showed the handset lacked a cooling component called a vapor chamber, implying an increased reliance on software to manage overheating, reviewers said.

Analysts said the lean toward software-based solutions stems from a renewed policy of cost-cutting — a strategy they say is eroding a reputation for innovator based on the power of hardware.

Lee said Samsung is “overemphasizing cost reduction, which led to this unfortunate case.”

Samsung Electronics Vice President and CEO Han Jong-hee at an annual shareholder meeting last month said he “will not compromise quality to reduce expenses and will continue to introduce products that place the highest priority on first-class experience and product quality”.

At least 1,885 consumers are unconvinced, after filing a class action lawsuit arguing that Samsung’s marketing is inflating the performance of the S22.

“If Porsche has a speed limit of 100 kilometers (62 miles) per hour, would you still buy it?” said Kim Hoon-chan, the attorney representing the consumers, adding that some 1,500 people have joined to file a second class action lawsuit.

© Thomson Reuters 2022





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