After temporarily halting production of its troubled Galaxy Note 7 smartphone earlier this week, Samsung confirmed in today’s statement to TechCrunch that it’s permanently discontinued the production of its flagship Galaxy smartphone over multiple incidents of exploding batteries.
This past weekend, major U.S. carriers AT&T, T-Mobile, Verizon and Sprint stopped offering new units as replacements for those affected by Samsung’s global recall. U.S. carriers are now offering Note 7 customers replacement devices from other brands, including Apple’s latest iPhone.
A spokeswomen for Samsung confirmed to TechCrunch that the company is ending production of the device for good. “We can confirm the report that Samsung has permanently discontinued the production of Galaxy Note7,” Samsung said.
The South Korean firm said in a filing with South Korean regulators that it was ending production of the device over “customer safety”.
In a media release issued this morning, Samsung promised to ask all global partners to stop sales and exchanges of the Note 7 “while further investigation takes place”.
We are working with relevant regulatory bodies to investigate the recently reported cases involving the Galaxy Note7. Because consumers’ safety remains our top priority, Samsung will ask all carrier and retail partners globally to stop sales and exchanges of the Galaxy Note7 while the investigation is taking place.
The company is asking Note 7 owners, including those with a supposedly safe replacement Note 7, to “power down and stop using the device and take advantage of the remedies available.”
The move comes amid reports that Note 7 replacements that Samsung had deemed safe were catching fire, too. As I mentioned, Samsung earlier this week temporarily halted Note 7 production—“readjusting the production volume” is how they framed it—but now they have reached a final decision to halt production of the phone globally, for good.
“For the benefit of consumers’ safety, we stopped sales and exchanges of the Galaxy Note 7 and have consequently decided to stop production,” said Samsung.
According to the South Korean finance minister Yoo Il-ho, scrapping the device altogether could easily hurt the country’s exports.
“Right now we can’t tell what the impact will be in the long term. It’s up to the company and the government cannot interfere,” Yoo Il-ho said. “But if they do scrap the model, it will have a negative impact on exports.”
The United States Consumer Product Safety Commission commended the decision, with chairman Elliot Kaye saying: “It is the right move for Samsung to suspend the sale and exchange of all Galaxy Note 7s.”
According to an earlier Bloomberg report, Samsung should blame itself because problems with the Note 7 batteries catching fire and exploding stem from the decision to launch the phone earlier than expected in an effort to beat this year’s “dull” iPhone.
“This has probably killed the Note 7 brand name,” said Edward Snyder, managing director of Charter Equity Research. “By the time they fix the problem they have to go through recertification and re-qualification and by the time that happens, they’re going up against the Galaxy S8 launch.”
Creative Strategies analyst Ben Bajarin, speaking to the BBC:
From Google’s perspective the timing couldn’t have worked out better for them in that they’re essentially trying to compete now in the premium sector against the likes of Apple and Samsung.
Now with this issue around Samsung and some questions and stigma around the brand, the product itself, could certainly help Google out. But I think Apple’s definitely the biggest beneficiary from here.
If there were people on the fence about whether or not to get an iPhone 7 Plus, for example, which is kind of in the same size range as the Note 7, that was one of the things that we think is benefitting Apple the most, just because that’s a competitive product and it’s an established brand.
Analysts are estimating that the Note 7 recall could end up costing Samsung as much as $17 billion in write-offs, lost profit and other expenses.
Samsung shares were down eight percent on today’s news, falling an additional 9.5 percent in London trading, their biggest daily percentage decline since 2008.
The drop has wiped $18.8 billion off Samsung’s market value. In comparison, Apple’s share price hit $117.49 in pre-market trading, its highest level so far this year.
All of this is terrible news for Samsung. The company is bound to suffer a considerable loss of consumer faith over this crisis and it could take years to recover from it.
Thoughts? Is brand damage inevitable for Samsung? And what should they do to turn this around, do you think?
Image courtesy The Loop.