On Tuesday, Samsung announced that it was halting the production of its device—including the replacements it has supplied customers.
The development is the latest in a string of embarrassing setbacks for Samsung over the Note 7, one of its flagship smartphones. It comes after cell phone carriers in the United States and Australia said they would stop offering replacement Note 7s following concerns that the new versions are no safer from fire risk than the originals.
Soon after the Galaxy Note 7 hit stores in August, some users reported that their phones were catching fire. Samsung (SSNLF) recalled about 2.5 million of the devices worldwide last month, blaming faulty batteries for overheating the phones and causing them to ignite.
Samsung posted the following statement in its newsroom:
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.
We remain committed to working diligently with appropriate regulatory authorities to take all necessary steps to resolve the situation. Consumers with either an original Galaxy Note7 or replacement Galaxy Note7 device should power down and stop using the device and take advantage of the remedies available.
The decision to halt production comes after a global recall of 2.5 million smartphones.
Airlines are barring the devices from flights—even when they’re powered down. Previously, the FAA restricted travelers from turning the smartphones on during flights or storing them in checked-in baggage.
Digital marketing professional and speaker Jason Falls posted the following on Facebook:
Though Samsung previously denied that the issue affected consumers in China, the country’s regulators told a different story.
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The Wall Street Journal reported:
Chinese regulators on Tuesday said that they had identified 20 cases of overheating or explosions involving the Galaxy Note 7 and urged users to switch off their devices. Samsung had previously excluded mainland China from its global recall of 2.5 million smartphones, stating that its devices there were safe since they didn’t include batteries from the supplier that it had initially identified as the source of the problem.
The Journal reported that Samsung was slow to respond to the growing issue:
For several hours after Chinese regulators announced the recall, Samsung’s Chinese website wasn’t updated to mention the new development, though the company’s previous statements, which had cast suspicion on Chinese phone explosion reports, appear to have been removed.
Others say Samsung’s China market is not the only aspect of the crisis where the company has shown neglect.
On Sunday, The Verge reported that Michael Klering, a Galaxy Note 7 owner in Kentucky, woke up around 4 a.m. because his device was on fire, filling his bedroom with smoke.
The story gets worse when you realize that the phone was a replacement for Klering’s first Galaxy Note. However, that’s not the end of the PR nightmare.
The Verge reported:
The most disturbing part of this is that Klering’s phone caught fire on Tuesday and Samsung knew about it and didn’t say anything. And actually, it gets worse than that.
Samsung asked Klering if they could take possession of the phone and he said no, though the company did pay to have it X-rayed — but the damning evidence comes in the form of a text message that Klering inadvertently received from a Samsung representative:
Just now got this. I can try and slow him down if we think it will matter, or we just let him do what he keeps threatening to do and see if he does it
The damage to Samsung’s finances and brand image are mounting as further incidents take place.
The Wall Street Journal reported:
Daniel Kim, a Seoul-based analyst for Macquarie, estimated that the potential losses to Samsung could reach 3.1 trillion Korean won ($2.8 billion) for the last three months of the year, which would be enough to wipe out the entire mobile division’s operating profits for the fourth quarter.
Consumers are growing increasingly frustrated with the company’s response, as well:
BBC’s technology correspondent, Rory Cellan-Jones, wrote:
[B]ack in early September when reports first emerged that the new phablet was overheating or even exploding, Samsung received praise for its swift reaction.
By quickly announcing a global recall, and spending a hefty sum on supplying replacement devices, the company was seen to be putting the safety of consumers above financial concerns,
Over the last week, however, it has looked flat-footed in responding to new reports from the United States of customers with replacement phones seeing them overheat or catch fire.
Of course, this whole thing has cost Samsung more than just money. There's the crucial matter of trust, and the hard-fought association with quality Samsung has worked to build over several years. With lingering questions of safety surrounding these updated phones, who would choose to buy one for themselves? Or for the people they care about? Even if Samsung swore up and down that they were safe, would you believe it? And could anyone blame you if you didn't? After all, this wasn't some random, low-cost phone Samsung churned out on the cheap. The Note 7 was a flagship device with flagship performance and a flagship price tag -- if Samsung couldn't nail down the quality on one of its most important phones of the year, how does it expect us to trust it enough to build safe new ones?
What do you think, PR Daily readers? What can Samsung do to fix its image in the midst of this crisis—or is the damage irreparable?
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