Samsung Electronics Co Ltd has halted production of Galaxy Note 7 and said on Monday night it would ask all carrier and retail partners to stop sales and exchanges of its flagship smartphone while a thorough investigation is taking place into why new replacement devices are catching fire as well.
Should customers keep using their Note 7?
No, the world’s top smartphone company urges customers to stop using it, after fresh reports of fires in replacement models raised new warnings from regulators, airlines and phone carriers.
“Consumers with either an original Galaxy Note 7 or replacement Galaxy Note 7 device should power down and stop using the device”, the company said in a statement.
Customers are also encouraged to exchange their Note 7 for a Galaxy S7 or a Galaxy S7 Edge, or ask their point of purchase for a full refund.
As it could be expected, airlines, forced to follow the FAA requirement, prohibit these products’ check-in and onboard use.
What is the future for Note 7?
Jan Dawson, tech industry analyst at Jackdaw Research, said in a tweet that this was “terrible news for Samsung” and the Note 7 is “likely dead”.
However, as analysts say a permanent end to Note 7 sales could cost Samsung up to $17 billion, the company has not shut down production entirely, but said earlier on Monday it would be “temporarily adjusting the Galaxy Note 7 production schedule in order to take further steps to ensure quality and safety matters”. That means halting production of certain components of the phone suspected for causing fires, including batteries.
But after all this, it’s not clear who would ever still want to buy one new Galaxy Note 7.
Samsung is taking a hit
To recap, the premium device was launched in August and was supposed to compete with Apple Inc’s latest iPhone for dominance in the smartphone market. However, within days of the launch, photos of charred Note 7s began appearing on social media, and Samsung has since recalled 2.5 million Note 7s.
The Note 7 crisis seems likely to generate serious concerns about Samsung’s other phones, especially if the safety issue relates to components other than the battery, which could result in huge financial and reputational costs.
The timing couldn’t be better for competitors.
There is no doubt that Apple’s rival iPhone 7 Plus could take benefit of Samsung’s safety issues. “While we have been relatively conservative in thinking through any beneficial impacts to Apple from Samsung’s issue, we do believe that after multiple safety concerns around the device, the longer term brand damage should now be assessed,” said analysts at Credit Suisse in a note earlier on Monday. “We believe the Note 7’s ongoing issues could help market share shifts for Apple.”
However, Google that has just launched its new Pixel handsets seems likely to attract more Samsung’s customers- they are used to paying high prices for a premium device and most importantly they already use Android. Switching from one mobile platform (Android) to another (iOS) is a pretty big deal. Apart from the design, you need to port over all your data and there is no guarantee that you will get all the apps you want.
Sources:
http://www.reuters.com/article/us-samsung-elec-smartphones-idUSKCN12A2JH
https://www.ft.com/content/f126c8fc-8e92-11e6-a72e-b428cb934b78
UNPRECEDENTED CRISIS: Samsung reportedly halts Note 7 production after replacements also explode
Hi!
I really enjoyed reading your article. Recently there have been (unverified) complaints about iPhone7 ‘explotions’ as well. This is most likely a marketing stunt, it raises some questions.
It is really almost unacceptably and out of the ordinary for a premium brand to have such a large scale issue go unnoticed until after launch date.
I personally feel its due to the heavy competition between Samsung and Apple that has taken place over the years. The need to be first, or best-selling, has surpassed the need to provide customers what they want: A good quality and innovative phone!
What do you think? How could such a large scale issue go unnoticed for so long?
Thank you for the article, Tania. I think, the actual question at hand is if Samsung hasn’t gone too far competing with Apple. Rumors surfaced linking the cause of the this Note 7-debacle to Samsung rushing production to release the Note 7 before the iPhone 7, trying to take market share from Apple. According to employees of Samsung, bad management and production rushing caused the phones to explode (Bloomberg, 2016). The question at hand is whether this impacts the company’s reputation and the willingness to pay from it’s customers. Do customers really want to pay a premium price if a company is more focussed on beating Apple, rather than making a good product?
I, however, disagree with your statement that switching platforms is a big deal. One of the biggest differences between Samsung (Android) and Apple, is that Apple offers it’s customers an ecosystem, while an Android phone doesn’t really do that. If you buy an Android phone, you sign in with your Google account. If you buy an iPhone, you can sign in with that same Google account and recover all contacts, agenda’s and mail linked to this account. Also, Apple offers an app called ‘Move to iOS’, which can transfer all this data.
Moving from iOS to Android is completely different. If you’re in the Apple ecosystem, you’re in. Your data is in iCloud, your computer syncs with your phone. There’s no app facilitating moving to Android.
I don’t think Apple will take advantage from the Samsung debacle publicly, but sure I think a lot of users will take a look to what Apple has to offer. This also has to do with customer perception. The majority of the customers think it’s either Samsung or Apple, and do not know other Android brands, given the market share. Other companies, like HTC, also make great phones, but are just less known.
https://www.bloomberg.com/news/articles/2016-09-18/samsung-crisis-began-in-rush-to-capitalize-on-uninspiring-iphone
http://www.idc.com/prodserv/smartphone-market-share.jsp