Samsung Galaxy Note7 US$17 Billion Fiasco

Samsung killed off the Galaxy Note7 in the hope of limiting the fallout from its exploding smartphone debacle. The South Korean firm decided on Tuesday to permanently halt sales and production of the Galaxy Note7 just hours after telling customers to stop using all versions of the smartphone. Its stock plunged 8% in Seoul, wiping about US$17 billion (RM71 billion) off the company’s market value. It’s a spectacular reversal for the South Korean electronics giant, which previously said that it had fixed a problem with the Note7 that caused some devices to burst into flames. It was forced to recall about 2.5 million Note7s in early September, just two weeks after the phone was launched, saying defective batteries were causing some to burst into flames. It then started to issue replacement phones but a number of customers reported that those devices were also catching fire, including one aboard a passenger jet. Samsung is now scrambling to limit the loss from one of the biggest smartphone recalls in history. The luxurious high-end phone was supposed to do battle with Apple’s iPhone 7 but instead ended up doing some severe damage to Samsung’s reputation. Analysts say Samsung’s risky move to ditch the Note7 entirely would be exorbitant, and it could put a US$9.5 billion (RM39.7 billion) dent in sales and erase US$5 billion (RM20.9 billion) in profits, according to one estimation. But the risk of prolonging the distress was worse. "It's a painful move but perhaps not an entirely bad one in the grand scheme of things, as it helps isolate and contain the bad perception to that specific product rather than spreading fear that all Samsung phones might explode," said Bryan Ma, Vice President of device research at IDC. If Samsung stops selling the Note7s, that will interpret into lost sales of up to 19 million phones that the firm was expected to generate during the Note7's product cycle, according to analysts. With the discontinuation of the Note7 made official, Samsung will lose a full half-year of flagship smartphone sales on top of the disposal and compensation costs related with the recall.