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
