Galaxy Note 7 fiasco: Three reasons why it’s not all over for Samsung

This piece originally appeared on Livemint.com

 

Smartphone makers are on shaky ground. Recently, BlackBerry announced it will stop manufacturing phones to focus on software.

Xiaomi, once considered an Apple challenger, saw its shipments plummet, and it dropped out of the top five. So did Lenovo. There were over 500 smartphone brands in China once, but only about 100 have survived. Apple iPhone sales stagnated this year.

Even dominant players can’t take their position for granted. Where does that leave Samsung after the Note 7 fiasco, which has cost it billions and damaged its reputation?

A few more missteps could spell doom for Samsung smartphones. But it also has three things going for it. It has a healthy lead over its nearest rival (Chart 1).

Historically, the fall for big handset makers happened slowly, giving it time to set things right (Chart 2). And, it has many models in its stable to latch on to (chart 3).

 

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News in numbers, Dec 11, 2015: Recall by Honda Cars India, Twitter’s India revenue…

 

 

90,210

 

What is it? Number of cars Honda Cars India will recall to replace the fuel return pipe, which leads unspent fuel back to the fuel tank.

 

Why is it important? Faulty return pipes could potentially result in fuel leakage and stop the engine. This is the fourth recall for the Japanese carmaker this year adding up to 3.3 lakh units in 2015. It’s about a fifth of the total number of cars that have been recalled in India since the Society of Indian Automobiles introduced a voluntary code on vehicle recall in July 2012.

 

Tell me more: The recall includes 64,428 units of diesel variants of Honda City (manufactured between December 2013 and July 2015) and 25,782 units of diesel variants of Honda Mobilio (manufactured between June 2014 and July 2015).

 

$140 billion

 

What is it? The capital Indian banks would need to ensure full implementation of Basel III norms by 2019, according to a report by ratings agency Fitch. Basel III norms require banks to have enough capital and liquid assets in its coffers.

 

Why is it important? It means banks will have to raise more capital. In case of public sector banks, that would mean government injecting capital to maintain its stake in the banks. The Indian government’s July announcement of providing $11 billion to state lenders over the next four years will not cover the requirement.

 

Tell me more: Bad loans account for 4.2% of the total lending in Indian banks, and more than a tenth of its loans are stressed (bad loans plus restructured loans)

 

Rs 13.26 crore

 

What is it? Revenue of the Indian unit of Twitter (TwitterCommunications India) in 2014-15.

 

Why is it important? It’s 0.12% of its global revenue ($1.59 billion), even though Twitter is estimated to have about 22.2 million users in India, or 7% of its global monthly users. It has a much bigger mindshare, and is being used extensively in the relief efforts around Chennai floods.

 

Tell me more: TwitterCommunications India’s revenue is up 3 times from Rs 4.17 crore last year. Its net profit also increased threefold to Rs 1.07 crore in 2014-15 from Rs 35.7 lakh the previous year. Globally, the company has been struggling to increase its user base.

 

Rs 21,457 crore

 

What is it? Total debt in ‘default’ category (It is considered ‘default’ if repayment is delayed by a day) as of December 8 this year, according to India Ratings and Research.

 

Why is it important? This is more than double of what was recorded in the entire year of 2014 – Rs 9,035 crore. It’s yet another indicator that the economy is not performing as well as the GDP numbers suggest.

 

Tell me more: Data from another rating agency, Credit Rating Information Services of India (CRISIL), shows that debt in the default category was at Rs 25,895 crore as of September this year compared to Rs 28,323 crore for the full year in 2014.

 

$3 billion

 

What is it? Extent of economic loss caused by severe rainfall and flooding in November and December in Tamil Nadu and Andhra Pradesh, according to reinsurance broker Aon Benfield.

 

Why is it important? One of the early estimates of the loss. Expect updates in the coming days, after on ground assessments and extrapolation of insurance data (Insurance penetration is low in India – about 3.9%). As it is, this is about a third of the annual economic losses India is estimated to incur per year, as per a report by the United Nations. The annual economic losses due to disasters is estimated to be about $9.8 billion per year, of which floods account for nearly three-fourth or 71% ($7 billion).

 

Tell me more: Claims by India’s sole domestic reinsurer, General Insurance Corporation, is likely to reach up to $300 million.

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