October 12, 2016 12:20
Samsung on Tuesday decided to stop all sales of its new flagship Galaxy Note 7 smartphone, a day after it temporarily halted its production and some 50 days after its first release. It is the first time for a smartphone model to vanish from the market due to defects.
"Investigation on the Note 7 is still underway, but we decided to stop sales as the safety concerns of customers are the top priority," a Samsung spokesman said in a statement on Tuesday.
Samsung knew the game was up when photos and video clips of the device catching fire went viral, even though none of the dozen or so reports of the replacement devices catching fire were conclusively proven to result from defective batteries.
U.S. telecoms AT&T, Sprint, T-Mobile and Verizon deciding to offer to swap Note 7s with new smartphones from other companies also played a decisive role in Samsung's decision to halt sales. The U.S. market accounts for around 30 percent of Samsung's mobile phone revenues, and a failure to market products there would seriously affect sales in other markets.
Industry watchers say Samsung will not only suffer huge losses but a severe blow to its brand image. The Note 7 was the fastest-selling model in the Galaxy series and praised as the best Android smartphone to hit the market so far.
Now it has tanked spectacularly, analysts predict Samsung's revenues this year will fall below W200 trillion for the first time since 2011 as losses total around W5 trillion (US$1=W1,123).
Lee Seung-woo at IBK Investment and Securities said in a report, "Samsung was boldly willing to go to war with the iPhone, but it rushed things somewhat. Without the support of its component makers, Samsung's irrational push ended up causing tremendous damage."
The Financial Times said the Samsung crisis will worsen as Apple aggressively markets products ahead of peak Christmas sales.
Others fear long-term damage. Hong Sung-tae at Hanyang University said, "The effects of deteriorating consumer confidence will remain for some time. Samsung will realize that it made a mistake by failing to use the massive recall as a chance to recover."
Customers will be able to get a refund or switch another phone starting from Thursday.
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