Samsung on Tuesday suspended all production of its Galaxy Note 7 smartphone, halted sales worldwide and told customers to stop using the device, following reports that replacements for combustible models were also catching fire.
“We recently readjusted the production volume for thorough investigation and quality control, but putting consumer safety as top priority, we have reached a final decision to halt production of Galaxy Note 7s,” the company said in a statement.
Samsung’s decision to halt sales and exchanges was “the right move”, Kaye said, adding that his commission was actively investigating reports of phones overheating and burning in multiple US states.
The US Federal Aviation Administration issued a guidance update, urging all passengers to power off, and not use, charge, or stow in checked baggage, all Samsung Galaxy Note 7 devices – originals or replacements.
Analysts have suggested that Samsung, battling ever-fiercer competition in the saturated smartphone market, may have rushed production of the Galaxy Note 7 because of the recent release of the iPhone 7 from bitter rival Apple.
The top-of-the-line Galaxy Note 7 was crucial to Samsung’s growth plans this year. The company is struggling to boost sales, squeezed by Apple in the high-end sector and by Chinese rivals in the low-end market.
Linda Sui, wireless smartphone strategies director at Strategy Analytics, estimated that Samsung could lose “$10 billion or more” over the recall.
“And the impact on brand image and consumer confidence will be even worse,” Sui said, adding that Samsung might be forced to consider junking the Galaxy Note 7 completely.
The crisis has shone a spotlight on Samsung’s management at a time when it is navigating a tricky generational power transfer within its founding Lee family.
Samsung is also under pressure from one of its shareholders, the activist US hedge fund Elliott Management run by billionaire Paul Singer.