Samsung Galaxy Fold Delay a Crucial Test for the Company, Analysts Warn

South Korean tech giant Samsung Electronics is "facing its biggest test ever", analysts said Tuesday after it delayed the release of its $2,000 foldable phone over screen problems.

The move by the world's biggest smartphone maker -- announced after reviewers provided with early devices reported screens breaking within days of use -- comes less than three years after its Galaxy Note 7 disaster.

The company said the Samsung Galaxy Fold, which had been due for its US release on Friday, "needs further improvements" before customers can receive it and a new release date will be announced in the coming weeks.

Samsung Electronics -- the flagship company of the sprawling Samsung Group, by far the biggest of the family-controlled conglomerates that dominate the South's economy -- spent nearly eight years developing the Galaxy Fold.

It has been widely promoted as the "world's first foldable smartphone" and is part of its strategy to propel growth with groundbreaking gadgets, while rivals such as China's Huawei have been racing to bring similar devices to market.

Kim Dae-ho, an analyst at Institute for Global Economy, said Samsung can regain customer trust as long as it identifies the problem and releases the perfected Fold "in the quickest possible time".

"Samsung is facing its biggest test ever," he said. "If they manage to pull this one off, it can bring greater success. Right now it is standing at the crossroads of destiny."

Samsung earlier this month launched the 5G version of its top-end Galaxy S10 device but faces increasing competition from Huawei across different price ranges, and has warned of a more than 60 percent plunge in first-quarter operating profit in the face of weakening markets.

Independent technology analyst Rob Enderle said the failure of a flagship item could send Samsung buyers to rivals.

"If a halo product fails, people don't trust that you build quality stuff," Enderle said.

"It can do incredible damage. And Huawei is moving up like a rocket, so this could be good for Huawei."

Samsung Electronics shares closed down 0.33 percent in Seoul on Tuesday.

'Pre-emptive action'
But analysts say that while the decision to delay may hurt Samsung's brand reputation in the short term, it could ultimately prevent it from repeating the critical mistakes of 2016, which cost it billions of dollars.  

That year, Samsung's reputation suffered a major blow after a damaging worldwide recall of Galaxy Note 7 devices over exploding batteries.

At the time, the firm showed a slow response to initial reports of the devices catching fire, claiming the hazard was only limited to a "small fraction of phones" manufactured.

But it later ended up announcing a recall of 2.5 million smartphones after several devices exploded.

It eventually traced the problem to the batteries, but decided to kill off the model for good.

Analyst Kim said the tech giant's approach with the Fold was quite different from the way it handled the Galaxy Note 7 fiasco.

"Back in 2016, Samsung was overconfident with its technology," and did not respond to the initial reports immediately, he said. "As a result, the damage was enormous," he said.

"The fact that Samsung is delaying the release of the Fold -- although the problem isn't as serious as the one Galaxy Note 7 had -- means it is taking pre-emptive action this time."