Samsung Electronics Co. Ltd. (SSNLF) is enjoying better-than-expected demand and pre-orders for its new Galaxy Note 7 smartphone, which is causing supply constraints.
In a statement to Reuters, the world’s largest smartphone maker said "as pre-order results for the Galaxy Note 7 have far exceeded our estimates, its release date in some markets has been adjusted." Samsung wouldn’t say where the supply constraints are coming from and which markets would be impacted. (For more, see: Samsung Profit Surges on Galaxy 7 Smartphone Sales.)
While strong demand for its latest smartphone could bode well for the company that has been surpassing Apple Inc. (AAPL) and it’s iPhone for smartphone dominance, if constraints persist the South Korean electronics company could leave some marketshare on the table. The delays come at a time when Apple is gearing up to launch its iPhone 7 in early September.
In 2015 Samsung had problems producing its Galaxy S6 edge phone resulting in disappointing sales. Reuters noted there are fears among some investors that history could repeat itself. A person familiar with the matter did tell Reuters that there isn’t a production problem with the curved screens on the Galaxy Note 7 and that shortages would not be a long term issue. Samsung said it was aiming to increase production at its locations where the Galaxy 7 Note phones are made and that it plans to meet the demand as “early as possible.”
Nomura analyst C.W. Chung told Reuters the supply situation isn’t a big risk given key components are made in-house. The analyst estimated Samsung could sell as high as 15 million Galaxy Note 7 phones in 2016. That compares with 9 million for the Galaxy Note 5 phones in 2015.
Samsung has been killing it in the smartphone market for some time now. In July, Samsung reported preliminary second-quarter results that showed profit rose 17.4% from a year earlier, marking its biggest profit in greater than two years. Samsung’s mobile division took a hit last year as market share declined but the debut of the Galaxy 7 has turned things around in 2016. The camera in the Galaxy 7, which is the same for its Galaxy Note 7, and battery life are better than previous models which has helped boost sales.