Sam­sung scraps Galaxy Note 7 over fire con­cerns

Kuwait Times - - FRONT PAGE -

Sam­sung’s new smart­phone was launched with the ex­pec­ta­tion of scal­ing new heights in a highly com­pet­i­tive, rar­i­fied mar­ket. In­stead it has left the com­pany star­ing into the abyss. What ini­tially seemed to be a tech­ni­cal glitch in a few de­vices swiftly turned into a full-blown cri­sis that looks set to in­flict in­cal­cu­la­ble dam­age on the South Korean elec­tron­ics pow­er­house in a mar­ket where brand con­fi­dence and loy­alty are para­mount.

So se­ri­ous did the prob­lem be­come with the Galaxy Note 7 and its ex­plod­ing bat­ter­ies that Sam­sung fi­nally bit the bul­let yes­ter­day and an­nounced it was scrap­ping the model en­tirely. The move could have dev­as­tat­ing con­se­quences given that the large-sized Note se­ries, along with the Galaxy S smart­phones, are Sam­sung’s flag­ship bear­ers in the fierce battle with arch-ri­val Ap­ple’s iPhones for supremacy in the high-end hand­set mar­ket.

The world’s largest smart­phone maker an­nounced a global re­call of 2.5 mil­lion Note 7s on Sept 2 - a de­ci­sive move that ini­tially seemed to have limited the dam­ag­ing fallout. But the wheels came off the whole re­call process as re­ports emerged of re­place­ment phones also catch­ing fire, prompt­ing a num­ber of ma­jor global distrib­u­tors to halt all sales and ex­changes of the de­vice.

‘Worst-Case Sce­nario’

“This is the worst-case sce­nario for Sam­sung,” said Jan Daw­son, chief an­a­lyst at Jack­daw Re­search. “To para­phrase Os­car Wilde: To lose one ver­sion of a prod­uct to a bat­tery is­sue may be con­sid­ered mis­for­tune; to lose two be­gins to look like care­less­ness,” Daw­son said. An­a­lysts have sug­gested the re­call dis­as­ter could end up cost­ing Sam­sung more than $10 bil­lion, but the larger con­cern will be the longterm im­pact on its over­all brand.

Sam­sung Elec­tron­ics’ mo­bile di­vi­sion may have driven its global rise, but the vast com­pany is ex­tremely di­verse with a prod­uct line rang­ing from mem­ory chips and dis­play pan­els to wash­ing ma­chines, TVs and fridges. Its suc­cess has been built, in large part, on its abil­ity to marry cut­ting-edge tech­nol­ogy with large-scale out­put to pro­duce re­li­able, high-qual­ity goods across a wide price range. The ini­tial re­call of the Note 7 alone was al­ways bound to have some brand im­pact, but it would have been limited if the prob­lem was per­ceived as an ex­cep­tion.

But an­a­lysts said the is­sue with the re­place­ment de­vices hinted at a pat­tern rather than a one-off-a far more dam­ag­ing prob­lem from a brand per­spec­tive. “To be in a situation where you claim to have iden­ti­fied the is­sue and solved it, only for the ex­act same is­sue to pop up again, is not a good look for a com­pany of Sam­sung’s size,” Daw­son said. “The per­cep­tions that flow from this may well spill over into other parts of their prod­uct port­fo­lio,” he said.

The cri­sis has raised ques­tions over Sam­sung’s man­age­ment and de­ci­sion-mak­ing abil­i­ties at a time when the fam­ily-run con­glom­er­ate is ne­go­ti­at­ing a del­i­cate gen­er­a­tional change of leadership. Lee Kun-Hee, the head of Sam­sung Elec­tron­ics as well as the par­ent Sam­sung Group, has been bedrid­den since suf­fer­ing a heart at­tack in 2014. So the pres­sure and the spot­light are very much on the 48-yearold vice chair­man and heir ap­par­ent J.Y. Lee, son of the older Lee, who was nom­i­nated to the Sam­sung Elec­tron­ics board just days af­ter the ini­tial Note 7 re­call was an­nounced.

Greg Roh, an an­a­lyst at HMC In­vest­ment Se­cu­ri­ties, said the man­age­ment - with all eyes on the im­mi­nent launch of Ap­ple’s iPhone 7 - may have mis­cal­cu­lated in of­fer­ing re­place­ments with the re­call. “I think Sam­sung rushed into hand­ing out new phones when it should have taken more time for a thor­ough in­ves­ti­ga­tion,” Roh said. “It was un­der too much pres­sure to dom­i­nate the mar­ket be­fore the launch of iPhone 7,” he added. The night­mare sce­nario for Sam­sung now, Roh said, would be Note 7 own­ers tak­ing the re­fund of­fered by Sam­sung and swap­ping to the iconic Ap­ple hand­set. “The rea­son con­sumers pre­fer brands like Sam­sung and Ap­ple is be­cause of prod­uct re­li­a­bil­ity. “The im­pact of the Note 7 will carry on to Sam­sung’s next smart­phone model. Over­all, brand dam­age is in­evitable and it will be costly for Sam­sung to turn that around again,” he said. — AFP

HONG KONG: A pedes­trian smokes a cig­a­rette as he walks past a poster for Sam­sung’s Galaxy Note 7 out­side a Sam­sung shop yes­ter­day. — AFP

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