Samsung's decision to delay the release of the nearly $2,000 foldable phone will hurt its brand reputation in the short term, but the flagging smartphone industry is still betting on the tech giant to produce a winner, analysts said Tuesday.
The South Korean electronics firm was set to launch its Galaxy Fold smartphone on April 26. After some reviewers, including CNBC's Todd Haselton, encountered issues with early testing units, Samsung said Monday the phone "needs further improvements" before it's released to customers. The company added that a new release date will be announced "in the coming weeks."
Samsung shares traded down 0.33% Tuesday afternoon, tracking below the South Korean benchmark index, Kospi, which traded near flat.
If the phone's launch is delayed for too long, it will be a cause for concern among stakeholders, according to Daniel Yoo, head of global strategy and research at Kiwoom Securities. He told CNBC by email that Samsung's flagship Galaxy S10 is seen as a "very satisfactory" device, but the launch of the foldable phone will determine if the world's largest smartphone maker can remain a leader in the sector and continue to play an important role in technology advancement.
"I expect Samsung to solve all the problems before the newly announced official launch date, and the date will be most likely before the end of 2Q2019," he said, referring to the three months that will end in June. "I doubt that the delay will be for long period of time given it had experience of Note 7 launch."
Bob O'Donnell, president, founder and chief analyst at Technalysis Research, told CNBC's "Squawk Box" on Tuesday that the delay will hit Samsung's brand.
"Granted, it's going to hit the brand, but I don't think it's a killer. It's not like the Note 7 battery issue or anything like that," he said, adding the smartphone giant needs "to get this right."
In 2016, Samsung experienced one of the worst technology recalls in recent times after some of its faulty Galaxy Note 7 devices suffered battery malfunctions and spontaneously caught fire.
Some reviewers have said their testing units appeared to have a defective hinge while others said their devices stopped working after they accidentally removed a protective film layer on the screen. The device tested by CNBC began flickering and then stopped working completely after two days of use even though the protective layer was not removed.
Samsung's push to get the Galaxy Fold in the hands of customers feels a "little bit rushed," according to O'Donnell.
"I'm not quite sure why they needed to rush it. Huawei has announced a phone, but is not going to be shipping for a long time," he said. "The importance of this device, long term, would make me presume that they would want to make sure everything is absolutely dead right with this. And clearly that didn't happen."
Huawei launched the Mate X at the Mobile World Congress in Barcelona earlier this year and said the smartphone will be available in the middle of 2019. Its price tag is steeper than that of the Galaxy Fold, costing approximately $2,600.
Foldable screen technologies have been in the works for a relatively long time, O'Donnell said. Beyond showing prototypes, the challenge in the past was to mass produce those display screen — something that Samsung is likely to be the first company to do, he said. Even with the delay, he added, the situation remains "salvageable."
"Remember that Samsung's been working on this screen technology for years and years. This is not something that they just came up with. So, this is about getting it packaged properly, there are a few little thing they are going to have to work on — I think they're relatively minimal," O'Donnell said, adding that his Galaxy Fold smartphone thus far did not have any of the issues the reviewers have faced.
The smartphone industry is struggling for growth due to several factors, including the fact that people are holding onto their current phones for longer. Market research firm International Data Corporation predicted in March that 2019 is set to be the third consecutive year of declining shipments, with worldwide smartphone volumes forecast to fall by 0.8% for the year.
Analysts have said that foldable smartphones may give the industry the boost it needs to reverse declining growth trends.
Patrick Moorhead, president and principal analyst at Moor Insights & Strategy, told CNBC that, as long as the final shipping units of the Galaxy Fold do not have any issues or Samsung enables an aggressive "no questions asked" replacement program, there are unlikely to be any issues in the growth of the foldable smartphones.
"Smartphone sales numbers are declining and the industry needs a winner with the category," he told CNBC by email.