Samsung halts sale, exchange of Note 7 over safety fearsSamsung on Tuesday called a worldwide halt to the sale and exchange of its Galaxy Note 7 smartphone, citing continued safety concerns, and advised all customers to stop using the device immediately.
The dramatic warning came in a written statement issued a little over a month after the world’s largest smartphone maker announced a global recall of 2.5 million Note 7s in 10 markets following complaints that its lithium-ion battery exploded while charging.
The unprecedented recall was a major PR blow for the South Korean conglomerate, which prides itself on innovation and quality, and the situation only worsened when reports emerged a week ago of replacement phones also catching fire.
Tuesday’s statement was the first formal acknowledgement of continued safety concerns and came a day after Samsung Electronics 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.
Analysts noted that the move came a little late given that a number of major distributors—U.S. telecom firm AT&T and German rival T-Mobile—unilaterally announced a halt to sales and exchanges of the model on Sunday.
Samsung said its investigation of the “recently reported cases” involving the Note 7 was being carried out in cooperation with the relevant regulatory bodies in those markets where the recall was ordered.
In the meantime, the company advised any consumer with an original or replacement Galaxy Note 7 to “power down and stop using the device” immediately.
A similar switch-off warning was issued by Elliot Kaye, chairman of the U.S. Consumer Product Safety Commission.
“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 U.S. states.
Analysts have suggested that Samsung, battling ever-fiercer competition in the saturated smartphone market, may have rushed production of the Note 7 with bitter rival Apple’s recently released iPhone 7 in mind.
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.
The trouble with the Note 7 and the handling of the recall, which analysts say could cost up to $2.0 billion, has shone a spotlight on Samsung’s management at a time when it is navigating a tricky generational power transfer within its founding Lee family.
Industry experts have criticised the Lee dynasty for controlling the vast group through a complex web of cross-shareholdings, even though they directly own only about five percent of total stocks.
And Samsung is also under pressure from one of its shareholders, the activist U.S. hedge fund Elliott Management run by billionaire Paul Singer.
In a detailed proposal unveiled last week, Elliott laid out a strategy for streamlining Samsung, splitting the company in two, dual-listing the resulting operating company on a U.S. exchange and paying shareholders a special dividend of 30 trillion won ($27 billion).
Elliott argued that Samsung, currently a maze of listed and unlisted companies with a notoriously opaque ownership and management structure, had suffered from a long-term undervaluation in the equity market.
Despite all its problems, Samsung on Friday issued a stronger-than-expected operating profit forecast for the third quarter, thanks largely to strong sales of memory chips and OLED display panels.
