Samsung announced a recall of all Galaxy Note 7 devices in September as a response to the spontaneous explosion of some devices in August. The immediate solution executed by Samsung was changing the supplier of batteries, but the solution failed.
Some of the replacement devices exploded as well, so the company started an investigation to reproduce the explosions and find the real cause of the phenomenon, something that Samsung experts were unable to achieve. This led to the cancellation of the product line entirely. Samsung has been experiencing a severe crisis not only with consumers but with safety regulators and investors as well.
Samsung’s major loss
Strategy Analytics estimated that the loss of Samsung could rise to $10 billion or more because of the problems linked to this particular device. However, even before the announcement of this issue, the company’s market value dropped about $17 billion in its South Korea-traded shares. This is a daily drop of more than 8 percent, the biggest since 2008.
Profits fell almost 30 percent in comparison to the same quarter last year.
“Samsung understands the concern our carriers and consumers must be feeling after recent reports have raised questions about our newly released replacement Note 7 devices. We continue to move quickly to investigate the reported case to determine the cause and will share findings as soon as possible. We remain in close contact with the CPSC throughout this process. We want to reassure our customers that we take every report seriously and we appreciate their patience as we work diligently through this process,” was the initial response to the amount of reports received.
What went wrong with the Galaxy Note 7
One of the biggest issues in this situation is that users do not know what caused the device to smoke and catch fire. Samsung still has not disclosed the problem and most consumers and independent experts are questioning the safety of their other products.
In the United States, Samsung received more than 90 reports of batteries overheating in the Galaxy Note 7, almost 30 reports of burns and more than 50 allegations of property damage. The United States Consumer Product Safety Commission monitored the situation and issued the warning about a potential recall of devices that replaced the original, risky devices.
Samsung recalled 2.5 million devices during this crisis. They offered customer incentives to trade the Galaxy Note for other Samsung products. In the U.S., customers with affected phones received up to $100 credit. How the company will repair property damages is still unknown.
The other option the company has is the expansion of Galaxy S7 and S7 Edge in the market, to stabilize the business, but whether the confidence in their products is restored or not is yet to be determined.
“Samsung has not been communicative with consumers, regulators or the media as clearly as it should have during this recall, especially for a hazard as dangerous as this one where your phone can catch on fire, damage your property and harm your family,” said a representative of the Consumers Union.
The Samsung Galaxy Note 7 is not the only product at risk
Samsung produces more than smartphones. All kind of consumer electronics is also exposed to safety problems. Kitchen appliances and television sets are among the dangerous products. In Australia, a lot of washing machines were reported because of some caused fires.
Regulators and government agencies have been involved before in safety situations linked to Samsung products. In past years there has been the recall of thousands of microwaves ovens and refrigerators because of fire risk or shock hazard.
Source: New York Times