Society

Samsung To End All Production Of Galaxy Note 7 Phone

| by Nik Bonopartis

First came the reports that Samsung's flagship, $700 Galaxy Note 7 smartphones were prone to exploding, with the devices leaving a New York boy with burns and starting a fire that destroyed a Florida man's Jeep.

Then came the costly recall, which devastated the Korean company's bottom line as it pledged to replace millions of the expensive handsets. The timing was especially bad for Samsung as its primary rival, Apple, released its new iPhone 7. The company also faces competition from emerging smartphone manufacturers in China.

And now Samsung has given up on the Galaxy Note 7 altogether -- announcing that it will no longer manufacture the troubled devices -- after reports that the replacement phones have also been catching fire, according to The Telegraph.

On Oct. 10, the company stopped production of the Galaxy Note 7 and on Oct. 11, announced it would permanently stop making the new line of phones, a move The Telegraph notes is "unprecedented from a major manufacturer."

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Experts and analysts were scrutinizing components for the Note 7 as part of Samsung's supply chain, The New York Times reported, looking for evidence that its rivalry with Apple -- which involves cramming the devices with more features and more powerful processors to woo customers -- could have led the company to try implementing too much too soon.

“With the Note 7, Samsung strengthened its power as a speedy competitor,” Lee Seung-woo, an analyst with IBK Investment & Securities, told the newspaper. “But one wonders whether it hasn’t raced ahead alone, without helping its component suppliers to catch up.”

An accompanying video on the Times' site shows smoke streaming from a Galaxy Note 7, melting the plastic of its protective case.

The announcement immediately led to a sell-off of Samsung shares, The Wall Street Journal reported, devaluing the company's market value by $17 billion. The 8-percent decline in shares was the company's biggest single-day stock market decline in eight years, the newspaper noted.

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Daniel Kim, an analyst for investment bank Macquarie Group, told the Journal that the Galaxy Note 7 recall -- combined with the lost sales -- could wipe out the company's entire fourth-quarter profits.

Company executives should look ahead to protecting its brand and its future, analyst Mark Newman of Sanford C. Bernstein & Co. told The Wall Street Journal. Newman said the company's executives should consider dropping the Galaxy Note line completely instead of trying to rehabilitate the device's reputation among consumers.

“Samsung needs to act swiftly," he said, "and move on to protect their brand image."

Sources: The Telegraph, The New York Times, The Wall Street Journal / Photo credit: Kevin Hutchinson/Flickr

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