Samsung ceases production of Galaxy Note 7, will discontinue the phone

Samsung ceased production of the Galaxy Note 7 and asked its partners around the world to stop selling the phone amid ongoing reports of the phone exploding or catching fire.

The Korean electronics giant initially recalled the phone more than a month ago, acknowledging “a battery cell issue” with the high-end handset that resulted in dozens of unspecified problems globally. Samsung recalled 2.5 million phones, but the overheating problems continued with some replacement phones that had been deemed safe.

The company said this morning it would stop production of the Galaxy Note 7, and The Wall Street Journal reported that it had informed South Korean regulators that it would permanently stop making and selling the phone.  

“Because consumers’ safety remains our top priority, Samsung will ask all carrier and retail partners globally to stop sales and exchanges of the Galaxy Note 7 while the investigation is taking place,” the company said in a press release. “We remain committed to working diligently with appropriate regulatory authorities to take all necessary steps to resolve the situation. Consumers with either an original Galaxy Note 7 or replacement Galaxy Note 7 should power down and stop using the device and take advantage of the remedies available.”

All four major U.S. wireless carriers stopped selling replacement Note 7 phones in recent days, and had also stopped issuing replacement Note 7 phones to customers who returned recalled devices.

Shares of Samsung plunged 8 percent Tuesday following the announcement as the company saw its market capitalization lose roughly $17 billion. Analysts had estimated the initial recall could cost Samsung between $1 billion and $2 billion, and the total toll on the bottom line could now push past $3 billion.

The Note 7 debacle comes at a crucial time for Samsung, which remains the world’s largest smartphone vendor in a cutthroat worldwide market where margins are notoriously slim. Samsung maintains a deep handset lineup, of course, and sales of the Galaxy S7 are apparently still strong.

But the company’s new flagship was poised to compete at the high end of the market during the crucial holiday season with the iPhone 7, which has enjoyed carrier promotions that one analyst described as “unprecedented.” And Google is moving aggressively to lure users to the Pixel, its new high-end phone.

“This is a serious blow to Samsung. A minor drama that affected less than .1 percent of all phones sold has been allowed to escalate into a major crisis of confidence,” Neil Mawston of Strategy Analytics wrote on the firm’s blog. “Samsung now has a fill a giant hole in its portfolio.”

Apple is clearly well positioned to take advantage of Samsung’s missteps as the holiday shopping season approaches. And other vendors are sure to try to exploit Samsung’s suddenly vulnerable position in the coming weeks as well.

For more:
- see this Wall Street Journal report
- read Samsung’s statement

Related articles:
Samsung suspends Galaxy Note 7 production: report
Samsung could see a second recall of the Galaxy Note 7
Samsung using hazardous materials permit to transport Galaxy Note 7 returns
T-Mobile to resume sales of the Galaxy Note 7 as carrier support for the phone picks up
More than 60% of recalled Note 7 units have been exchanged in U.S. and Korea, Samsung says
Samsung’s Galaxy Note 7 sales were up 25% over last year’s model - prior to recall