Sam­sung halts Note 7 pro­duc­tion after new scare Sam­sung re­called 2.5 mil­lion Note 7s due to faulty bat­tery

Kuwait Times - - TECHNOLOGY -

Sam­sung Elec­tron­ics Co Ltd has sus­pended pro­duc­tion of its flag­ship Galaxy Note 7 smart­phones, a source said yes­ter­day, after re­ports of fires in re­place­ment de­vices added to the tech gi­ant’s worst ever re­call cri­sis. Top US and Aus­tralian car­ri­ers also sus­pended sales or ex­changes of Note 7s, while ma­jor air­lines re­it­er­ated bans on pas­sen­gers us­ing the phones, after smoke from a re­place­ment de­vice forced the evac­u­a­tion of a pas­sen­ger plane in the United States last week.

Fires in phones that were meant to re­place de­vices that had been re­called be­cause of their propen­sity to ex­plode would be a dis­as­ter for the world’s largest smart­phone maker, sug­gest­ing it had failed to fix a prob­lem that has al­ready hurt its brand and threat­ens to de­rail a re­cov­ery in its mo­bile busi­ness.

“If the Note 7 is al­lowed to con­tinue it could lead to the sin­gle great­est act of brand self-de­struc­tion in the history of mod­ern tech­nol­ogy,” said Eric Schif­fer, brand strat­egy ex­pert and chair­man of Rep­u­ta­tion Man­age­ment Con­sul­tants. “Sam­sung needs to take a gi­ant write­down and cast the Note 7 to the en­gi­neer­ing hall of shame next to the Ford Pinto.”

In a reg­u­la­tory fil­ing, Sam­sung said it was “ad­just­ing” ship­ments of Note 7s to al­low for in­spec­tions and stronger qual­ity con­trol due to some de­vices catch­ing fire. It did not com­ment on the pro­duc­tion halt or the cause of the fires, while the source - who de­clined to be iden­ti­fied be­cause they were not au­tho­rized to speak to the me­dia - did not ex­plain whether spe­cific prob­lems had been iden­ti­fied or when pro­duc­tion was halted.

A Sam­sung of­fi­cial told Reuters ear­lier yes­ter­day it was in­ves­ti­gat­ing re­ports of “heat dam­age is­sues” and would take im­me­di­ate ac­tion to fix any prob­lems in line with mea­sures ap­proved by the US Con­sumer Prod­uct Safety Com­mis­sion.

On Sept 2, Sam­sung an­nounced a global re­call of 2.5 mil­lion Note 7s due to faulty bat­ter­ies which caused some of the phones to catch fire. It or­dered new bat­ter­ies from an­other sup­plier and started ship­ping re­place­ments to cus­tomers just two weeks later. But sim­i­lar prob­lems arose with a re­place­ment Note 7 on Oct. 5, which be­gan smok­ing in­side a South­west Air­line flight in the United States.

Sam­sung shares, which have re­bounded after an ini­tial sell-off on the re­call, closed down 1.5 per­cent, com­pared with a 0.2 per­cent rise for the broader mar­ket.

“I think the clean­est thing to do is to give up on the Note 7,” said HDC As­set Man­age­ment fund man­ager Park Junghoon, whose fund owns Sam­sung shares. “What’s scary is that this is caus­ing peo­ple to re­peat­edly doubt Sam­sung’s fun­da­men­tal ca­pa­bil­i­ties, so it’s im­por­tant for Sam­sung to get past this is­sue quickly.”

Sam­sung’s re­call cri­sis has co­in­cided with pres­sure from one of the world’s most ag­gres­sive hedge funds, El­liott Man­age­ment, to split the com­pany and pay out $27 bil­lion in a spe­cial div­i­dend.

AIR­PLANE BAN

Ma­jor air­lines, air reg­u­la­tors and air­port au­thor­i­ties re­it­er­ated bans on pas­sen­gers us­ing the phones, say­ing Note 7s should not be pow­ered up or charged on board. A South Korean govern­ment agency said it was mon­i­tor­ing re­ports of the fires and warned that the re­called Note 7 de­vices should not be used or charged in­side air­planes.

Mo­bile car­ri­ers also took ac­tion. Ver­i­zon Com­mu­ni­ca­tions Inc, the No 1 US wire­less car­rier, said yes­ter­day it would sus­pend the ex­change of re­place­ment Note 7s, and would al­low cus­tomers to ex­change the re­place­ment for an­other smart­phone.

AT&T Inc, the No 2 US wire­less car­rier, said ear­lier that it would stop is­su­ing re­place­ment Note 7s and would let cus­tomers with a re­called Note 7 ex­change that de­vice for an­other Sam­sung smart­phone or other smart­phone of their choice. No 3 wire­less car­rier T-Mo­bile US Inc also said it was tem­po­rar­ily halt­ing sales of new Note 7s as well as ex­changes while Sam­sung in­ves­ti­gated “mul­ti­ple re­ports of is­sues” with its flag­ship de­vice. T-Mo­bile of­fered cus­tomers who brought in their Note 7s a $25 credit on their phone bill. Aus­tralia’s largest car­rier, Tel­stra Corp, said Sam­sung had paused sup­ply of new Note 7s, while fel­low Aus­tralian car­ri­ers Op­tus and Voda­fone said they had stopped is­su­ing new Note 7s. South Korea’s two largest mo­bile car­ri­ers, SK Tele­com and KT Corp, said they were mon­i­tor­ing the sit­u­a­tion. —Reuters

SEOUL: A file photo taken on Septem­ber 2, 2016 shows vis­i­tors test­ing Sam­sung Galaxy Note7 smart­phones at a Sam­sung show­room in Seoul. —AFP

MANILA: Chair­man of e-com­merce gi­ant Alibaba, Jack Ma speak­ing dur­ing the Asia-Pa­cific Eco­nomic Co­op­er­a­tion (APEC) CEO sum­mit in Manila. —AFP

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