Samsung Permanently Kills The Note 7 After New Phones Catch Fire And Could Lose $17 BILLION In Sales
After several cases of the updated and “safe” Note 7 exploding or catching fire, Samsung has permanently stopped production of it’s their high-end smartphones. On Tuesday, the South Korean tech giant was asking all carrier and retail partners around the world to stop sales of the Note 7 while it investigates the handset’s battery problems. The company was in the middle of a vast and expensive global recall where 2.5 million handsets were to be returned or exchanged that began in September.
Samsung released a statement:
“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 7. For the benefit of consumers’ safety, we have stopped sales and exchanges of the Galaxy Note 7 and have consequently decided to stop production.”
Existing Note 7 users have been requested to turn off their devices and return them to the place of purchase. The company has instructed all the carriers to allow Note 7 users to switch the troubled device with any other device from Samsung or any other manufacturer.
Sprint, Verizon, AT&T and T-Mobile have all suspended sales of the Samsung Galaxy Note 7 after the recall.
The company has said that faulty lithium-ion batteries were overheating the device and causing it to ignite. The company decided to stop production after at least five fires were reported in replacement devices, including one incident taking place on a Southwest Airlines plane. A replacement Samsung Galaxy Note 7 reportedly caught fire on a Southwest plane last Wednesday. The incident occurred before the plane was airborne and nobody was hurt. The phone was powered off and in the owner’s pocket when a “thick grey-green angry smoke” began seeping out of the phone. The replacement phone had burned through the carpet and scorched the subfloor of the plane.
South Korean newspaper Hankyoreh suggested that Samsung is moving towards a permanent halt.
“It won’t be easy to resume production and sales of Note 7 even if the US Consumer Product Safety Commission announces that it was not a faulty product that caused the ignition,” Hankyoreh said quoting a source at Samsung.
Samsung told CNBC it would “have more specific action plans after talks with carriers and government bodies in each country.”
The company estimated a loss of $1 billion during the first recall. But by killing off the Note 7, the loss is estimated as much as $17 billion in the sales based on lost sales of the 19 million Galaxy Note 7 units Samsung had originally expected to sell during the device’s lifetime.
The permanent scrapping of the phone is to ensure that the Note 7 will limit long-term risk to one of the top phone manufacturers in the world.
“They are really, really in crisis mode,” said Vivek Wadhwa, professor at Carnegie Mellon University’s College of Engineering, who said he had spoken to a higher-up at the company. “They are all over it. What he told me was that the executive team is getting hourly updates on this. So they are taking it very seriously. They know they messed up over here — they know they have a disaster on their hands.”
The financial impact has just begun to rear its ugly head. Shares of Samsung closed over 8 percent lower on Tuesday after news of pulling the plug on one of its flagship phones. The South Korean company’s shares closed at 1,545,000 won with around $18 billion being wiped off the value of the company, according to Thomson Reuters data.
Samsung’s loss could be Apple’s gain. Shares in Samsung’s phone rival closed 1.74 percent higher on Monday in the belief that Note 7 customers would defect to an iPhone.