Samsung woes deepen over Galaxy Note 7

Samsung Electronics took another hit today over its recalled Galaxy Note 7 smartphone, acknowledging it was "adjusting production" of the device after major distributors stopped offering replacements because of continued safety concerns.

AFP| Last Updated: Oct 10, 2016, 17:31 PM IST
Samsung woes deepen over Galaxy Note 7

Seoul: Samsung Electronics took another hit today over its recalled Galaxy Note 7 smartphone, acknowledging it was "adjusting production" of the device after major distributors stopped offering replacements because of continued safety concerns.

The South Korean electronics giant has struggled since issuing a global recall in early September for 2.5 million of its flagship Galaxy Note 7 "phablet" following complaints that the lithium-ion battery exploded.

Reports have since emerged of replacement units also catching fire, prompting US telecommunications firm AT&T and German rival T-Mobile to announce Sunday a halt to recall exchanges pending further investigations.

Their announcement prompted a steep dive in Samsung's share price, which fell more than four percent at one point in morning trade. It recovered later to close the day at 1.68 million won ($1,515)-- down 1.52 per cent.

The market was also reacting to a South Korean media report that Samsung had temporarily shut down Note 7 production lines after discussions with consumer safety regulators from South Korea, the United States and China.

"We are in the process of adjusting production volumes," Samsung -- the world's largest maker of smartphones -- said in a written response to the report.

The company said the move was "to enhance quality control and to enable thorough investigations following the recent cases of Galaxy Note 7 explosions".

Analysts have suggested that Samsung, battling ever-fiercer competition in the saturated smartphone market, may have rushed production of the Note 7 with bitter rival Apple's recently released iPhone 7 in mind.

The top-of-the-line Note 7 was crucial to Samsung's growth plans this year, with the company struggling to boost sales, squeezed by Apple in the high-end sector and Chinese rivals in the low-end market, as profit has stagnated.

With images of charred phones flooding social media, the unprecedented recall has proved a humiliation for a firm that prides itself as an icon of innovation and quality.

The recall process initially stumbled with some mixed messages, but seemed to be on track until last week when the reports of replacement phones catching fire began to emerge.

AT&T said it would still offer customers the option to exchange Galaxy Note 7s for another Samsung smartphone or other device of their choice, while T-Mobile said it was halting sales of the Note 7 as well as the exchanges.

"It's all got very serious again," said S.R. Kwon, an analyst at Dongbu Securities.

"They could just pull the Note 7 off the market, but the real concern is that it might not even end there," Kwon said.

"It will damage Samsung's brand image and also affect the sales of other Galaxy smartphones," he added.

AT&T is the South Korean company's third-biggest customer while T-Mobile's parent is number four, according to estimates compiled by Bloomberg.