Business & Economy

Samsung halts production of troubled Galaxy Note 7

South Korean firm urges users to turn phone off immediately as analysts say recall could cost company $17 billion.

Samsung has announced a total halt to production and a recall of its troubled Galaxy Note 7 smartphone, citing continued safety concerns over the device bursting into flames.

Analysts have said that the move could cost the world's top smartphone maker $17bn, a huge blow as it fights Apple for domination of the market.

"We recently readjusted the production volume for thorough investigation and quality control, but putting consumer safety as top priority, we have reached a final decision to halt production of Galaxy Note 7s," the company said in a statement on Tuesday.

Earlier, the tech giant had urged owners to switch the phone off over safety concerns.

Samsung said that it had asked all global carriers to stop sales of Note 7s and stop exchanging original devices for replacements, while it worked with regulators to look into the problem.

"Consumers with either an original Galaxy Note 7 or replacement Galaxy Note 7 device should power down and stop using the device," the South Korean firm said in statement.

Samsung's decision to pull Note 7s off the shelves for the second time in less than two months has raised doubts about the firm's quality control, while industry commentators have questioned transparency at the tech giant.

"It is extremely difficult organisation to get an interview and to get information from. That's the way it operates," Al Jazeera's Harry Fawcett said, reporting from Seoul, said. 

Claire Reilly, senior writer at CNET Australia, told Al Jazeera "there were criticisms that Samsung did not move swiftly enough" after fires were first reported.

"I think the initial delay was because a recall is very scary for the company as they think about brand damage, bottom-line and share price," she said. "They moved a lot more swiftly which is what they had to do in the second case."


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Top US and Australian carriers on Monday suspended sales or exchanges of the Note 7s, while aviation authorities banned passengers from using the phones, after smoke from a replacement device forced the evacuation of a passenger plane in the United States last week.

"Its share prices at the close of trading here in Seoul were down by 8 percent which is nearly $17bn in terms of valuation of this hugely influential powerful and wealthy company in South Korea," Al Jazeera's Fawcett said.

Aviation risk

The premium device launched in August and was supposed to compete with Apple's latest iPhone for supremacy in the smartphone market. Well received by critics, its first problem was a shortage as pre-orders overwhelmed supply.

But within days of the launch images of charred Note 7s began appearing on social media, in the first sign that something was seriously amiss. Samsung has since recalled 2.5 million Note 7s due to faulty batteries.

"This has probably killed the Note 7 brand name. Who knows if they'll even be allowed to re-release it," said Edward Snyder, managing director of Charter Equity Research.


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Samsung did not immediately comment on whether it was considering ending Note 7 sales permanently or whether it had identified the cause for the fires in replacement devices. The company is offering refunds and to exchange Note 7s for other products.

"The question that Samsung has to answer is why did not it get further in front of this problem earlier. It does seem the real source of the issue has yet to be identified," the Al Jazeera correspondent said.

The Korean Agency for Technology and Standards met Samsung and experts on Monday and "confirmed the possibility of defects in the new [Galaxy Note 7] product," the agency said in a statement on Tuesday.

The US Consumer Product Safety Commission said Samsung was making the right decision by halting sales and exchanges of the device.

The US Federal Aviation Administration and South Korea's Transport Ministry added their voices to concerns from the aviation industry, saying no Note 7s should be used or charged inside airplanes.

Verizon Communications, the largest US wireless carrier, said it may shift marketing away from the Note 7 heading into the critical holiday selling season.

Three other US carriers - AT&T, T-Mobile, and Sprint - suspended sales in September.

Source: Al Jazeera And Agencies