Updated: October 13, 2016 12:34:00 am
When did this crisis start?
Samsung Galaxy Note 7 was launched on August 2 and first went on sale in the US and South Korea in mid-August. The phone was supposed to be launched in India by the end of August, but that never happened.
By September 2, Samsung recalled the phone, as reports emerged of Note 7 devices over-heating, catching fire and even exploding. Samsung promised it would fix the issue in newer versions of the phone. In the US, over 92 cases of Note 7 catching fire were reported.
The replacement phones came with a green battery indicator to show they were safe. They went on sale by the end of September, but just a couple of days into October, the problems recurred. While they were being charged, Note 7 devices managed to burn down a jeep and a garage in two separate incidents in the US. The most serious case: A replacement Galaxy Note 7 smartphone caught fire inside a Southwest Airlines flight from Baltimore to Louisville, US, and passengers had to be evacuated. Since then, five other cases of replacement phones catching fire in the US have been reported, besides cases in South Korea as well.
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Does Samsung know what went wrong with Galaxy Note 7?
Its Note 7 appeared to have an issue with its battery. Like all premium smartphones these days, this one also came with a non-replaceable lithium-ion battery. As has been reported recently, any fault in the manufacturing process can lead to the phone overheating, leading to fires.
Samsung is also the world’s largest manufacturer of lithium batteries. But the South-Korean firm doesn’t yet know what exactly went wrong with the phones. A report in The New York Times says Samsung engineers are still trying to figure out the problem. In the company’s own labs they’ve been unable to get a Galaxy Note 7 to explode. The report also says the engineers were under pressure to fix the problem. So the conclusion they hastily arrived at was that defective batteries from one particular factory caused the issue in the first case. After this, sales resumed by the end of September, only for the problem to return.
How does this affect Samsung?
Note 7 was its new flagship device. For Samsung, 2016 started on a great note thanks to its S7 and S7 Edge, which did very well and helped the company’s mobile division report big profits. The Note 7 was supposed to boost all of this and Samsung was expected to sell 14 million of these devices.
With reports of the fires in replacement phones and news of production coming to a halt, Samsung’s stock has taken a beating in the market. The company has lost nearly $17 billion in market share since the replacement Galaxy Note 7s started exploding. Now Samsung has cut profit estimates for its third quarter by 2.6 trillion won or nearly $2.3 billion. So yes, for Samsung, the Note 7 was an important phone, one that would have helped it continue its profits in the crucial holiday quarter. With Google launching its own premium Pixel and Pixel XL and Apple’s iPhone 7 Plus now out, Samsung has lost control of the crucial premium segment of smartphones.
In hindsight, how well did Samsung handle the replacement of the Note 7s?
Not too well. Even in early September, when the first fires and explosions began to be reported, the company hesitated in issuing ‘an official recall’ and was criticised by US watchdog group, Consumer Reports.
Even when the replacement phones started catching fire, the company didn’t stop sales immediately. It was only on October 10, four days after a Note 7 caught fire inside a plane, that sales and exchanges for older phones were stopped.
More so, emails from consumers have shown that the replacement process was confusing. In an email to US tech website, The Verge, a customer writes how the Samsung team had very little clarity about the replacement process. The email also said the team has “limited information on a lot of process at the time”.
For now, Samsung is working with the US Consumer Product Safety Commission (CPSC), asking all customers to power down their phones and return them.
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