After dozens of reports of explosions, then subsequent recall of close to 2.5 million units, Samsung has finally pulled the plug on the Galaxy Note 7. The smartphone that was supposed to help Samsung compete with Apple’s iPhone 7 is no more. Samsung has decided to discontinue the once highly-anticipated smartphone because of multiple reports of replacement phones catching fire just like the defective ones.
Botched Recall Leads to Complete Discontinuation
Samsung announced the decision to discontinue worldwide sales of the Galaxy Note 7 phone this Tuesday. The company reached the decision after botching the recall that might have salvaged Samsung’s tarnished reputation.
After reports reached Samsung that some of the original Galaxy Note 7 phones were catching fire, Samsung recalled all units sold globally. An internal investigation had revealed that faulty wiring in the lithium-ion batteries sourced from South Korea was at fault. Even a slight mistake in wiring can cause lithium-ion batteries to overheat and catch fire, especially when plugged in for charging.
Samsung replaced some of the recalled devices with supposedly safe Note 7s. However, in the past weeks, a number of incidents were reported in the media where these replacement Note 7s have also caught fire. Most notably, a Southwest Airline in Boston was grounded because the replacement Note 7 of a passenger on board exploded. The panicked passenger dropped the smartphone onto the floor, where it burned a hole through the carpeting while giving off a “thick, gray green” smoke.
Backed into a corner, Samsung has halted all sales and production of the Galaxy Note 7. The company issued a press release expressing regret of the discontinuation, but didn’t give any reasons why the replacement Note 7s were also catching fire. Samsung has hired hundreds of engineers to isolate the problem causing the explosions. However, none of these engineers have managed to replicate the explosions, leading to speculation that the battery cells, as initially claimed, may not be the root cause of the problem.
Things Go from Bad to Worse for Samsung
While the company struggles to find out what caused the Note 7s to smoke and explode, Samsung’s shares have plummeted by 8% in a single day, the biggest daily drop for the company ever.
Samsung is facing an unprecedented disaster in upcoming months. It’s losing customer confidence and market dominance to other brands like Google, and even Microsoft, which has been out of the smartphone game for years. At the same time, the recall and subsequent discontinuation has wiped some $17 billion off Samsung’s market value.
According to one Seoul-based Macquarie Group analyst, the potential losses for Samsung could reach $2.8 billion by the end of this year. That would cancel out all the profits that the Samsung mobile division has made in the fourth quarter.
The biggest crisis facing Samsung, however, is not the money, but trust. Profits can be earned back, but trust, as they say, is like a broken mirror.
No other consumer brand has faced a catastrophe of this magnitude in recent times. The only other case that comes to mind is the Tylenol recall in 1982. That year, seven people died from taking Tylenol capsules laced with cyanide. The company recalled 31 million bottles of Tylenol from the nation’s pharmacies, a case that’s taught as a crisis management tale in business schools today. Tylenol, however, bounced back two months later and remains a prominent headache-alleviating product to this day.
What to Do if You Have a Recalled or Replaced Galaxy Note 7 Phone
First of all, immediately stop using it. Samsung has advised customers to power down the phones. If you have a fireproof box or a safe in your home, keep the phone there.
There’s no point in replacing the phone anymore. Samsung may issue a refund, but the company has not made any specifics public yet. Most customers have spent nearly a thousand dollars on the high-end phone. Carriers in the U.S. are currently offering Note 7 owners the option to switch to another brand of smartphone.
The best thing Galaxy Note 7 owners can do right now is to stop using the phone and await word from Samsung on what to do next.