SEOUL (BLOOMBERG) - Samsung Electronics is ending production of its problematic Galaxy Note7 smartphones, taking the drastic step of killing off a smartphone that became a major headache for South Korea's largest company.
After halting sales of the new versions of the large-screen smartphone, Samsung finally pulled the plug on a key product that was supposed to compete with Apple Inc's iPhones and other high-end smartphones during the US holiday shopping season.
Samsung had already recalled the Note7 once last month and the latest move comes after customers reported that replacement phones were also catching fire. The crisis has left Samsung scrambling to figure out the cause of the battery fires and to explain how a company known for manufacturing expertise could have missed such a critical product flaw twice.
Samsung originally blamed one battery supplier for the problems and switched to an alternative company, but it is now investigating the issue again. "Samsung needs to act swiftly and move on to protect their brand image," said Mr Mark Newman, an analyst with Sanford C. Bernstein in Hong Kong.
Pressure had been mounting for Samsung. The US Consumer Product Safety Commission warned users not to use the Note7 due to concerns over more incidents of overheating. The Korea Agency for Technology and Standards also asked Samsung to stop selling or exchanging the Note7 after the regulator confirmed possible defects in the new phones.
Samsung shares fell 8 per cent on Tuesday, wiping out about US$17 billion (S$23.3 billion) of market value. The company originally introduced the Note7 in August and then recalled the initial shipment of 2.5 million phones after a spate of battery fires. It then faced a second round of overheating in replacement devices that it had thought were safe.
Samsung's announcement came after consumers reported problems with supposedly safe phones in the US and China, and wireless carriers such as AT&T and Australia's Telstra halted sales.