Samsung reach end of Galaxy: Note 7 recall could cost $19bn

Samsung today axed its flagship Galaxy Note 7 smartphone after being unable to stop its faulty batteries catching fire and exploding.

When reports came in from all over the world of the phones catching fire the South Korean tech giant initially announced a recall of the devices.

Then when it emerged that customers reported that their supposedly ‘safe’ replacements were also catching fire it seemed there were few options left for Samsung.

Safety

The tech company announced that it would permanently stop production of the Galaxy Note 7 for the sake of consumer safety.

Yesterday it announced that it was “adjusting production” of the troubled devices but it said today in a statement:

“Putting consumer safety as the top priority, we have reached a final decision to halt production of Galaxy Note 7s.”

Existing Note 7 customers were warned to immediately “power down and stop using the device”  and were told they could apply for a full refund or swap the phone for other Samsung products.

Experts estimate that today’s decision could cost $17bn in lost sales plus up to $2.2bn in customer refunds.

Greg Roh from HMC Investment Securities said this was a huge blow for Samsung.

Damage

He said: “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.

“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.”

Analysts believe that disillusioned Samsung customers are more likely to switch to rival Android manufacturers rather than migrate in large numbers to Apple.

At first it all went well for the Note 7 with widespread praise for its curved screen, super-fast charging, waterproofing and high-end cameras.

That was until reports started coming in of the devices smouldering, catching fire and even exploding which first led to a  “voluntary replacement programme” which was soon ramped up to an official recall.

Exploding

Samsung may have recovered at that point but when the replacement phones also began to develop similar faults, the writing was on the wall.

South Korea’s safety agency is still investigating why the replacement phones have been exploding, and an official said the replacement phones may have a different defect to the problem with the original Note 7s.

If so then that is a double blow of bad luck for Samsung’s latest flagship smartphone.

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