Samsung on Tuesday suspended all production of its Galaxy Note 7 smartphone, halted sales worldwide and told customers to stop using the device, following reports that replacements for combustible models were also catching fire.
The South Korean company’s latest efforts to contain a snowballing recall crisis that threatens to derail the powerhouse global brand came as the federal US consumer regulator issued an alarming warning of the possible dangers the Note 7 posed to its owners, their families and homes.
The news slammed Samsung’s share price, which closed down 8.0 per cent at 1.54 million won, following a 1.5 per cent drop the day before.
The measures announced by the world’s largest smartphone maker came a little over a month after it recalled 2.5 million Note 7s in 10 markets following complaints that its lithium-ion battery exploded while charging.
The unprecedented move has turned into a PR disaster for the company, which prides itself on innovation and quality, and the situation only worsened when reports emerged a week ago of replacement phones also catching fire.
“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.
A day after it said it was “adjusting” the manufacturing volume of Note 7s, Samsung said Tuesday it was “putting consumer safety as the top priority” and halting production completely.
Earlier in the day it had directed all its carrier and retail partners worldwide to stop sales and exchanges of the Galaxy Note 7 pending a thorough investigation.
Customers will still be allowed to apply for a full refund or to swap their Note 7s for other Samsung handsets.
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 — a warning echoed by the head of the US Consumer Product Safety Commission, Elliot Kaye.
“No one should have to be concerned their phone will endanger them, their family or their property,” Kaye said in a press release.
Samsung’s decision to halt sales and exchanges was “the right move”, Kaye said, adding that his commission was actively investigating reports of phones overheating and burning in multiple US states.