Samsung Electronics has urged all users of its Galaxy Note 7 smartphone to stop using the device while a thorough investigation takes place into why some replacement models, issued after an earlier recall, are catching fire as well.
The warning deepens Samsung’s safety crisis just as rival devices from Apple and Google hit the market, ahead of the crucial holiday sales season. Some analysts say that the move could mean sales of the Note 7 never recover, risking lasting damage to Samsung’s reputation.
Shares in Samsung fell as much as 5 per cent on Tuesday morning in Seoul.
The South Korean company has halted production of its flagship smartphone and said on Monday night that it would ask all global partners to stop sales and exchanges of the Galaxy Note 7 during the investigation.
“We remain committed to working diligently with appropriate regulatory authorities to take all necessary steps to resolve the situation,” it said in a statement. “Consumers with either an original Galaxy Note 7 or replacement Galaxy Note 7 device should power down and stop using the device and take advantage of the remedies available.”
Jan Dawson, tech industry analyst at Jackdaw Research, said in a tweet that this was “terrible news for Samsung” and means the Note 7 is “likely dead”.
The company has not shut down production entirely, which would be an expensive and lengthy process, but said earlier on Monday that it would be “temporarily adjusting the Galaxy Note 7 production schedule in order to take further steps to ensure quality and safety matters”. That means halting production of certain components of the phone to ascertain why some replacement models have also been prone to safety issues.
The company is expected to issue a further statement later this week once it has investigated fresh overheating problems, which have led to speculation that it was too quick to blame the earlier safety issues on an external battery supplier. The replacements’ components had been switched over to a new battery supplied by a division of TDK.
The quality issues have raised concerns among operators that there could be “contagion” to other Samsung phones and products if the safety issue relates to components other than the battery. However, no signs exist that the overheating issue relates to any model apart from the Galaxy Note 7 and Samsung’s investigation only relates to the affected model.
The timing of the Samsung issue is a potential boon for Google, which has launched its new Pixel handsets to compete with the world’s largest smartphone maker. “Google have an absolute open goal,” said one network source.
Even before Samsung’s latest moves, some US mobile carriers had said they would stop offering the phone’s replacements because of safety concerns. The decision by US carriers including AT&T and T-Mobile US followed reports last week that some Samsung replacement devices provided to customers also caught fire.
The latest setback comes as Samsung struggles to contain the fallout from the recall of 2.5m Note 7 phones. Last week, a US aircraft was evacuated because of smoke coming from a replacement device. Subsequent American reports arose of other replacement Note 7 phones catching fire. That prompted US mobile carriers to stop all sales and exchanges.
“This is a really bad hangover that just won’t go away,” said Bryan Ma, an analyst at IDC. “Just when Samsung thought that they could finally put the battery issue behind them and start pumping up sales for their hero product, this issue reared its ugly head again.”
Samsung said it was investigating the US reports of “heat damage issues” and would announce the results of its probe once completed.
“If we determine a product safety issue exists, Samsung will take immediate steps approved by the CPSC [US Consumer Product Safety Commission] to resolve the situation,” it said.
T-Mobile said on Sunday that it was temporarily suspending all sales of the Note 7 and exchanges for replacement Note 7 devices. AT&T said it would no longer exchange Note 7 phones, pending further investigation of the reported incidents. Verizon Communications said the phone was out of stock at its stores.
South Korean regulators on Monday said they were monitoring the US reports, and repeated the warning that Note 7 phones should not be used or charged inside aircraft.
“One question that now comes back to mind is whether it is truly a supplier issue or actually a design flaw,” Mr Ma said. “Even if it doesn’t turn out to be a direct fault of Samsung Electronics, it might not really matter any more as [the company’s] name has been tainted.”
However, Mr Ma said Samsung was unlikely to drop the Note 7 phones altogether, given the amount it has invested in the device as part of efforts to revive the company’s fortunes.
The damaging recall has not eroded Samsung’s earnings so far. Last week, Samsung reported a third-quarter operating profit of Won7.8tn ($7bn) on sales of Won49tn — surpassing analysts’ forecasts — as strong sales of memory chips and display panels helped offset the impact of the Note 7 recall.
However, some analysts believe Apple’s rival iPhone 7 Plus may benefit from Samsung’s woes.
“While we have been relatively conservative in thinking through any beneficial impacts to Apple from Samsung’s issue, we do believe that after multiple safety concerns around the device, the longer term brand damage should now be assessed,” said analysts at Credit Suisse in a note earlier on Monday. “We believe the Note 7’s ongoing issues could help market share shifts for Apple.”
source: London (UK) – FT
Comments
Post a Comment