Samsung’s new smartphone was launched with the expectation of scaling new heights in a highly competitive, rarified market. Instead it has left the company staring into the abyss. What initially seemed to be a technical glitch in a few devices swiftly turned into a full-blown crisis that looks set to inflict incalculable damage on the South Korean electronics powerhouse in a market where brand confidence and loyalty are paramount.
So serious did the problem become with the Galaxy Note7 and its exploding batteries that Samsung finally bit the bullet Tuesday and announced it was scrapping the model entirely. The move could have devastating consequences given that the large-sized Note series, along with the Galaxy S smartphones, are Samsung’s flagship bearers in the fierce battle with arch-rival Apple’s iPhones for supremacy in the high-end handset market.
The world’s largest smartphone maker announced a global recall of 2.5 million Note 7s on September 2 — a decisive move that initially seemed to have limited the damaging fallout. But the wheels came off the whole recall process as reports emerged of replacement phones also catching fire, prompting a number of major global distributors to halt all sales and exchanges of the device.
“This is the worst-case scenario for Samsung,” said Jan Dawson, chief analyst at Jackdaw Research.
“To paraphrase Oscar Wilde: To lose one version of a product to a battery issue may be considered misfortune; to lose two begins to look like carelessness,” Dawson said.
Analysts have suggested the recall disaster could end up costing Samsung more than USD 10 billion, but the larger concern will be the long-term impact on its overall brand. Samsung Electronics’ mobile division may have driven its global rise, but the vast company is extremely diverse with a product line ranging from memory chips and display panels to washing machines, TVs and fridges.
Its success has been built, in large part, on its ability to marry cutting-edge technology with large-scale output to
produce reliable, high-quality goods across a wide price range. The initial recall of the Note 7 alone was always bound to have some brand impact, but it would have been limited if the problem was perceived as an exception.
But analysts said the issue with the replacement devices hinted at a pattern rather than a one-off — a far more damaging problem from a brand perspective.