Samsung Electronics Co. Ltd. is permanently ending production of its Galaxy Note 7 smartphone following multiple reports of replacement phones catching fire.
The company has asked all carrier and retail partners to stop sales of the phone and to offer exchanges to those who have previously acquired one. It has also advised anyone who has purchased either an original Galaxy Note 7 or replacement Galaxy Note 7 device that they should power down, stop using the device and take advantage of the remedies available.
The move is a blow to Samsung as it has struggled to keep pace with the continuing popularity of Apple’s iPhone. Shares in Samsung plummeted following the announcement, dropping 8 percent Tuesday, according to Bloomberg, wiping out about $17 billion of the company’s market value.
Samsung recalled the original Galaxy Note 7 in early September and started issuing replacement phones later the same month. Initially saying it affected only 0.1 percent of phones, Samsung said that phones were exploding because of a manufacturing fault caused by their battery supplier. However, the replacement phones that caught fire were powered by batteries from a different supplier, suggesting a more serious design flaw.
The U.S. Consumer Product Safety Commission welcomed the move by Samsung to cease sales of the phone. It told The Verge that “it is the right move for Samsung to suspend the sale and exchange of all Galaxy Note 7s,” and that the CPSC will “continue our active investigation” into the phone’s issues. A formal recall through the Consumer Product Safety Commission appears likely to follow.
The decision to completely terminate the Galaxy Note 7 line leaves Samsung without its top-of-the-range phone, a device that was meant to compete with the iPhone 7 Plus. Whether Samsung will resurrect a new version of the phone in the coming year, as in the Galaxy Note 8, is yet to be seen, but the Note name may now be completely sullied as a brand. Samsung does make a number of phablets such as the Galaxy Mega, but unlike the Note series, the phones have never been particularly popular outside of Asia.
Samsung also will face huge marketing challenges. Branding expert Erich Joachimsthaler, chief executive of the brand strategy consulting firm Vivaldi, said the company will have to spend several months rebuilding its relationship with consumers by admitting how it messed up, then return to focus on products and brand building. “Strong brands do recover when bad things happen to them – as the majority of consumers are forgiving and forgetful,” he said.
Those who own a Galaxy Note 7 and have not yet exchanged their phone should either contact Samsung or the company they purchased the phone from for either a replacement unit or a refund.
With reporting from Robert Hof