Samsung Electronics suspended production of its flagship Galaxy Note 7 smartphones, a source said on Monday, after reports of fires in replacement devices added to the tech giant's worst-ever recall crisis.
Top US and Australian carriers also suspended sales or exchanges of Note 7s after smoke from a replacement device forced the evacuation of a passenger plane in the United States last week.
Fires in phones that were meant to replace devices that had been recalled because of their propensity to explode would be a disaster for the world’s largest smartphone maker, suggesting it has failed to fix a problem that has already hurt its brand and threatens to derail a recovery in its mobile business.
“If the Note 7 is allowed to continue it could lead to the single greatest act of brand self-destruction in the history of modern technology,” said Eric Schiffer, brand strategy expert and chairman of Reputation Management Consultants. “Samsung should arrest the sale of Note 7’s and protect the safety of their clients before profits and ultimately as a byproduct protect Samsung.
Hall of shame
Samsung needs to take a giant write-down and cast the Note 7 to the engineering hall of shame next to the Ford Pinto.”
Samsung did not immediately comment on the production halt, while the source – who declined to be identified because they were not authorised to speak to the media – did not explain whether specific problems had been identified or when production was halted.
Samsung said it was investigating reports of “heat damage issues” and would take immediate action to fix any problems in line with measures approved by the US Consumer Product Safety Commission.
Smoking
On September 2nd, Samsung announced a global recall of 2.5 million Note 7s due to faulty batteries which caused some of the phones to catch fire. But similar problems arose with a replacement Note 7 on October 5th, which began smoking inside a Southwest Airline flight in the US.
Samsung shares, which have rebounded after an initial sell-off on the recall, were down 1.4 per cent as of 0549 GMT, compared with a 0.2 per cent rise for the broader market. “I thought the Note 7 matter was coming to an end, but it’s becoming an issue again,” Alpha Asset Management fund manager CJ Heo said, adding he expected the ongoing crisis to hurt sales in the short-term.
Samsung’s recall crisis has coincided with pressure from one of the world’s most aggressive hedge funds, Elliott Management, to split the company and pay out $27 billion in a special dividend. – (Reuters)
