Smartphone crisis: Samsung halts sale, exchange of Note 7

Company’s share price plunged 4.8% Tuesday morning

SEOUL: Samsung told customers worldwide to stop using their Galaxy Note 7 smartphones as it struggled to contain a snowballing safety crisis that threatens to derail the powerhouse global brand.

The South Korean conglomerate also called a halt to worldwide sales and exchanges of the troubled Note 7s, as the federal US consumer regulator issued an alarming warning of the possible dangers the device posed to its owners, their families and homes. The news slammed Samsung’s share price, which plunged by as much as 4.8% in early morning trade.

Tuesday’s announcement came a little over a month after the world’s largest smartphone maker announced a recall of 2.5 million Note 7s in 10 markets following complaints that its lithium-ion battery exploded while charging.

“If it’s once, it could be taken as a mistake but for Samsung, the same thing happened twice with the same model so there’s going to be a considerable loss of consumer faith,” said Greg Roh at HMC Investment Securities.

“The reason consumers prefer brands like Samsung and Apple is because of product reliability so in this case, brand damage is inevitable and it will be costly for Samsung to turn that around again,” Roh said.

Samsung’s statement on Tuesday was the first formal acknowledgement of continued safety concerns with the replacement Note 7s and came a day after it acknowledged it was easing production of the flagship smartphone.

“Because consumers’ safety remains our top priority, Samsung will ask all carrier and retail partners globally to stop sales and exchanges of the Galaxy Note 7 while an investigation is taking place,” the statement said. A number of major distributors -- US telecom firm AT&T and German rival T-Mobile -- had unilaterally suspended sales and exchanges of the model on Sunday.

Samsung also advised all customers with an original or replacement Galaxy Note 7 to “power down and stop using the device” immediately.

The top-of-the-line Note 7 was crucial to Samsung’s growth plans this year, with the company struggling to boost sales, squeezed by Apple in the high-end sector and Chinese rivals in the low-end market, as profit has stagnated. Linda Sui, wireless smartphone strategies director at Strategy Analytics, estimated that Samsung could lose “$10 billion or more” over the recall.

Published in The Express Tribune, October 12^th, 2016.

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