Samsung scraps Galaxy Note 7 due to fire concerns

Samsung has scrapped its troubled Note 7 phone less than two months after its official launch, amid ongoing safety concerns around phones catching fire.

The company confirmed in a statement that would stop making the phone, only hours after it warned users to turn off their devices and stop using them.

“For the benefit of consumers’ safety, we have stopped sales and exchanges of the Galaxy Note 7 and have consequently decided to permanently stop production,” a spokesman for Samsung Ireland said.

The company confirmed the decision to stop production in a filing to the Seoul stock exchange, and earlier said it had asked phone networks to stop the sale and exchange of the Note 7.

Samsung is offering to exchange Note 7s for other products or to give consumers refunds.

Reputation damage

The decision to drop the Note 7 could cost the firm up to $17 billion (€15.3bn) in lost sales. More harmful could be the damage to the brand’s reputation.

Samsung recalled 2.5 million phones last month following a number of reports of phones catching fire or smoking. At the time, the company said it believed a small number of batteries were the cause, and began replacing the phones with new models.

However, some replacement models still had problems, and there was one report of a Southwest Airlines flight being evacuated after a Note 7 emitted smoke.

Most of the phones were sold in the US and Asia. A number were shipped to Ireland to meet pre-orders. However, they started shipping just ahead of the recall, so numbers are understood to be very small.

Samsung has not confirmed the cause of the fires, although officials in Seoul said it was looking at several possibilities, including the batteries.

The move is a huge blow to the South Korean firm, which is locked in a bitter smartphone battle with rival Apple. The Note 7 was launched in August, and positive reviews led to a shortage of devices as pre-orders outstripped supplies. 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 with the smartphone.

High energy content

“It’s difficult to know exactly what the cause is but it could be a battery manufacturing fault rather than a phone circuitry issue,” said Prof Will Stewart, vice-president of the Institute of Engineering and Technology in the UK.

“These issues with lithium batteries happen because their energy content is high per unit weight. That is great in terms of keeping phones and other devices light but modern devices use quite a lot of power and we like to recharge them quickly, so if something does go wrong the total energy released is quite high, hence the fires.”

Samsung was already facing fierce competition in the run-up to Christmas, with both Apple and Google releasing new smartphones in recent weeks. Now, with the Note 7 off the shelves, and the company facing potential damage to the reputation of its other products as a result, the impact on Samsung could be considerable.

“Samsung needs to act swiftly and move on to protect their brand image,” said Mark Newman, an analyst with Sanford C Bernstein in Hong Kong.

Companies such as Facebook have already taken action. The firm’s virtual reality arm Oculus collaborated with Samsung on the Gear VR mobile headset, but updated its software in recent days to remove support for the troubled phone.

A notice on the website stated :“Oculus is removing support for all Note7 devices on the Oculus platform. Until further notice, Note7 devices will not be compatible with the Gear VR.”

Investors wiped nearly $20 billion off Samsung Electronics’ market value on Tuesday as its shares closed down 8 per cent, its biggest daily percentage decline since 2008.

– Additional reporting: Reuters, Bloomberg