Samsung’s launch of its latest flagship smartphone has now turned into a full-blown fiasco.
After reports of more exploding devices surfaced last weekend, the Korean tech giant is now telling all of its retailers and carrier partners to immediately stop selling the Galaxy Note 7. In a statement today (Oct. 11) it also encouraged owners of the device to immediately “power down and stop using” their phones:
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.
Elliot F. Kaye, chairman of the US Consumer Product Safety Commission (CPSC), issued a statement supporting Samsung’s decision and advising consumers to turn off their Galaxy Note 7’s and exchange them:
No one should have to be concerned their phone will endanger them, their family or their property. Due to the ongoing safety concerns associated with Galaxy Note7 phones, it is the right move for Samsung to suspend the sale and exchange of all Galaxy Note7s. I also appreciate the safety leadership role the wireless carriers and retailers are playing by temporarily stopping the sale of the Note7 and not providing the Note7 model as a replacement device.
While we continue our active investigation into reports of phones overheating and burning in multiple states, consumers should power down and stop using all Galaxy Note7s. This is the safest course of action.
Consumers who still have an original Note7 or who received a replacement Note7 are urged to take advantage of the remedies available, including a full refund.
The agency has issued a full recall of the phones, however. A spokesperson for the CPSC told Quartz “an investigation is ongoing.”
In late September, Samsung replaced its initial batch of 2.5 million shipped Galaxy Note 7 phones, after consumers reported their newly-purchased phones were exploding. It did not replace phones in China, which had different batteries—but then they started to explode, too. And since last week, at least five owners of the replacement Galaxy Note 7 devices say their devices overheated, and emitted smoke or caught fire. The company responded by halting production of the phone.
Share prices for Samsung Electronics sank nearly 4% on Korean stock exchange on the announcement. Yet the stock continues to hover near an all-time high.
Despite the fiasco, analysts say the Galaxy Note 7’s bumpy rollout will have minimal impact on the Samsung Electronics’ bottom line, primarily because its components business remains strong. The company will release its third-quarter earnings on October 27.
“They are still going to do well financially since they have so many other business units and components is strong to help balance any offsets by the note line,” says Ben Bajarin, who tracks the mobile phone industry at research firm Creative Strategies. “It will hurt their overall operating margin from the mobile units since they get really good margins on the note, but I’m not convinced this hurts them long term.”
Still, consumers who saw the phone as the Android counterpart to the iPhone 7 will look elsewhere. “There’s too much stigma and concern now,” adds Bajarin. “They have halted sales and no US carrier will sell it again. I’m certain even if Samsung says they fixed it, it is pretty much over.”