Apple Must Be Loving Samsung's Fiery Debacle

By Markets

The dual-camera system on iPhone 7 Plus is a major selling feature. So is the fact that they don't catch on fire for no reason. Image source: Apple.

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As far as PR crises go, it really doesn't get any worse than this. Or rather, it doesn't get any better than this, depending on your perspective. There's nothing more gratifying than seeing your biggest competitor go down in literal flames.

Late Monday, after weeks of back-forth over recalls and replacements, Samsung finally told customers to toss the Galaxy Note 7 for their own safety after the units kept spontaneously combusting.  

Apple (NASDAQ: AAPL) must be loving it.

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The second time was not the charm

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To say that Samsung botched the launch, subsequent recall, and second batch of defective units is an understatement. Carrier partners and regulators are taking matters into their own hands for the sake of the consumer. The South Korean tech giant inadvertently exacerbated the PR nightmare by accidentally sending one affected consumer a text suggesting it would try to "slow him down" so the company could have more time. Oops, wrong number.

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This couldn't come at a better time for Apple, as the company has seemingly done a good job with upselling customers to the iPhone 7 Plus with the new dual-camera system, which is one of the larger model's headline selling features. The 5.5-inch iPhone 7 Plus is Apple's most direct competitor to Samsung's 5.7-inch Galaxy Note 7, and the two companies dominate the space for premium phones and phablets.

Demand already appears to be concentrated on the iPhone 7 Plus. Quoted shipping times on the larger models are longer, and third-party inventory-checking sites also show little to no inventory for the 7 Plus at most locations, though there is greater availability of the standard iPhone 7.


Come on over


In recent quarters, Apple has touted increasing Android switcher rates as it continues to woo customers from the other side. With Samsung's debacle, combined with the fact that other Galaxy-branded devices could be hurt from the fallout, Apple should enjoy an influx of Android switchers.

S&P analyst Angelo Zino just put out a research note saying that he expects that Apple could grab a whole percentage point of worldwide market share from Samsung due to the crisis. That could translate into Apple selling an incremental 14 million to 15 million more devices than it otherwise would have in the September quarter.

As carriers and regulators urge customers to come return their Samsung devices while simultaneously halting sales of affected models, there's a good chance that a lot of those users will defect to iOS.

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Evan Niu, CFA owns shares of Apple. The Motley Fool owns shares of and recommends Apple. The Motley Fool has the following options: long January 2018 $90 calls on Apple and short January 2018 $95 calls on Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.