Samsung: strong demand for Note 7 could cause delays, stock dives 2%

Big 5

Samsung shares fell 2 percent on Wednesday after the technology giant said stronger-than-expected demand for its new Galaxy Note 7 meant it had to push back the release date in some markets.

“We appreciate the strong demand and positive response to the Galaxy Note7 from consumers across the globe. As pre-order results for the Galaxy Note7 have far exceeded our estimates, its release date in some markets has been adjusted,” Samsung said in a statement emailed to CNBC.

“We look forward to meeting consumers’ demand as early as possible,” the company added without saying which markets delays could be possible in.

The South Korean electronics titan unveiled the 5.7-inch Note 7 earlier this month with analysts hailing it as one of the best devices on the market. Samsung’s latest statement suggests that the device is selling well, something that can help drive further growth in its mobile division.

But fears that a supply shortage could lead to consumer dissatisfaction and ultimately them turning to other devices from the likes of Apple or Huawei, sent shares of Samsung sliding.

The company did not say what was causing the supply constraint. A spokesperson said it was not to do with the slightly curved screen on the Note 7, a problem it suffered when it launched the Samsung S6 Edge last year.

Analysts however are not worried, suggesting the high demand is a good problem for the company to have, and with a lack of viable alternatives, customers are unlikely to switch brands.

“More than 90 percent of customers will wait rather than switch to other phones because as a matter of fact, there are not many good options or alternatives in the market, because Apple iPhone 7 will come in the late September, and other competing models are not as attractive,” Daniel Kim, equity analyst at Macquarie, told CNBC by phone.

Kim forecasts that Samsung will sell between 12 million and 14 million units between July and the end of December.

Samsung has streamlined its smartphone portfolio and brought out devices better able to compete with Apple over the last year, which helped operating profit in its IT and mobile communications division – of which smartphone sales are a large chunk – rise 56 percent year-on-year in the second quarter of 2016.

Source: CNBC