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Samsung shares plummet amid Note 7 stop

October 11, 2016

Samsung's share price has shed 8 percent after the South Koreans announced they would halt the sale of their potentially dangerous Galaxy Note 7 smartphones. Batteries had shown a tendency to spontaneously catch fire.

Samsung Galaxy Note 7
Image: Getty Images/AFP/G. Baker

Samsung halts sales of recalled Galaxy Note 7

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Investors wiped almost $14 billion (12.6 billion euros) off Samsung Electronics' market value in afternoon trade on Tuesday, with shares eventually plunging by 8 percent on the back of a decision to halt sales and exchanges of the company's troubled Galaxy Note 7 smartphone. The company also said it permanently stopped the production of this smartphone.

Analysts had argued a permanent end to Note 7 sales could cost Samsung up to $17 billion and severely tarnish its other products in the minds of consumers and carriers.

South Korean regulators had announced they had found another defect with the Note 7, and urged users to stop using the phones. They did not identify the new defect.

Samsung said owners of the phones should turn them off and return them to the store where they bought them for a refund or an exchange for a different phone. The US Consumer Product Safety Commission echoed that advice.

Samsung throttles smartphone production

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The agency said they are investigating at least five cases in the US which the phones allegedly overheated and caught fire.

"No one should have to be concerned their phone will endanger them, their family or their property," said Elliot Kaye, chairman of the safety commission, in a statement. He called Samsung's decision to stop distributing the device "the right move" in light of "ongoing

safety concerns."

Problems with the phones bursting into flames began in early September, just one month after they went on sale. By September 15 Samsung announced consumers could exchange their original Note 7 phones with new versions that were supposed to have resolved the fire problem.

But the problem appears to have persisted with the replacement phones, prompting Samsung's total recall announcement on Monday.

Battle for market share

It's a crisis situation for the South Korean tech giant, which is locked in fierce battle for market share with Apple and other leading smartphone producers.

"This has been a real black eye on the product," said Ben Bajarin, a consumer tech industry analyst with the Creative Strategies firm.

It appears that Samsung, itself, doesn't know why the phones are prone to burst into flames.

"We are working with relevant regulatory bodies to investigate the recently reported cases involving the Galaxy Note 7," the company said in its statement, adding that "consumers' safety remains our top priority."

The lack of clarity is making a bad situation worse, according to analyst Jan Dawson of Jackdaw Research

"What's happened in the last few days just complicates things enormously," he said. "It calls into question their ability to manage quality control and everything else that goes into that."

Samsung is fighting to keep pace with the Apple juggernaut, which holds about 50 percent of the smartphone market. At the other end, the Korean manufacturer - which holds about one-third of the market - is battling low-end smartphones from China and elsewhere.

bik,hg/bw (AP, AFP, Reuters)

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