Mike Wuerthele
A day after Samsung issued two statements declaring that it was "adjusting production" of the troubled Galaxy Note 7 to respond to complaints and fires, the company announced on Tuesday that it has "consequently decided to stop production" — but the consequences of the entire debacle may extend for some time.
"We recently readjusted the production volume for thorough investigation and quality control, but putting consumer safety as top priority, we have reached a final decision to halt production of Galaxy Note 7s," Samsung said in a statement on Wednesday. "For the benefit of consumers' safety, we stopped sales and exchanges of the Galaxy Note 7 and have consequently decided to stop production."
AppleInsider spoke with several AT&T corporate-owned store managers, who are generally furious about how the situation has been handled by Samsung.
"Those Samsung guys? They're not here," said one store manager. "We're getting the brunt of this, telling people that they can't get a Note 7, and before that, that we didn't have anything to give them in exchange. I can't even tell you how many people have yelled at me because the Note 7 was garbage."
Long-term effects of the crisis
Estimates of Samsung's lost profits from the Note 7 issue and the generally poor handling of it have grown significantly over the last month. Initial estimates pegged losses of $5 billion over the product's life cycle. However, as news of the complete production stop of the Galaxy Note 7 spread, analysts started singing a different tune.
Credit Suisse, the original author of the $5 billion figure, now claims that the complete loss will be $19 billion including recall expenses, assuming lost sales of up to 22 million phones.
According to Reuters, two lawsuits over the botched design and consequent fires have already been filed in the U.S.
Reputation damage may be the most costly
While media coverage of the issue doesn't seem as prevalent as negative press reports surrounding the lack of a headphone jack on the iPhone 7 family, a greater problem may be damage to Samsung's reputation and overall brand impact.
"The people this weekend? They were pissed that we could only offer them a [Samsung] phone in exchange until recently," said one AT&T store manager. "The floodgates opened when corporate said that they'd just take the [Note 7] back."
Among the AT&T stores we spoke to, there have been 104 exchanges of the Note 7 in total, with 82 happening since the company loosened up its return policy for the device, allowing for other brands to be exchanged for the problematic phone. Most have switched to the iPhone, with 72 people opting for an iPhone 7 or iPhone 7 Plus in the last few days.
"This has probably killed the Note 7 brand name," said managing director of Charter Equity Research Edward Snyder. "By the time they fix the problem they have to go through recertification and requalification and by the time that happens, they're going up against the [Galaxy] S8 launch."
Samsung initially blamed un-named battery suppliers for the initial round of conflagrations. However, as reports of newly replaced Galaxy Note 7 phones bursting into flames started circulating, this time while the phones were powered off or not being charged, some doubt has been cast on Samsung's original account of the matter as well.
Wednesday's statement is the most definitive and clear remark about the issue that Samsung has made yet, nearly nine weeks after the crisis began and six weeks after the "voluntary recall" was announced. Not clear is if Samsung intends to do anything about the confused communications about the issue still coming from a third party handling the return and refund process.
"The [Galaxy Note 7] is forever going to be tarnished and the danger is that the brand becomes irretrievably damaged as well," said Stephen Robb, a partner at UK law firm Weightmans. "They need to be writing to every customer with an apology and some form of 'compensation'... It will clearly be costly for the company but the alternative is to end up going the way of Nokia and Blackberry."
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116 Comments
I have to write it.....ready?
#KARMA
LOL. Sam could not have managed this any worse. The Note brand is severely damaged, perhaps permanently. Karma for this lying, corrupt organization
Key question is what % switch to iOS. Even 25-30% would be a huge win for Apple
The big problem Samsung have here is that discontinuing production is to suggest they have not figured out the root cause of the failures.
If they don't understand what has happened here, there is zero reason to believe the same problem won't feature in new phones they release.
Samsung are in big trouble here. I'm sure Apple will benefit somewhat, but it's the other Android manufacturers that must be rubbing their hands with glee.
I normally wouldn't say this, but I do feel for the carriers. They're the face of this issue unfortunately. The first person a customer see's is someone working in a store who sold them the phone. Also, it was really shitty of Samsung to only let customers get a different Samsung phone at first. Let the customer choose whether or not it wants to get a different Samsung phone. Are they (Samsung) really afraid everyone will just switch to an iPhone? I wouldn't say this is entirely true and the article proves this. Some people are very happy with Android and will just switch to a different manufacturer.
The way they've handled this seems very poor....like they wanted to just sweep this under the carpet and try not to let this be a big deal. Now its time for the FAA (TSA?) to ban this phone on all flights and confiscate this phone upon discovery at a security checkpoint. This is truly a very dangerous situation, especially if in the air. Its not like you can just land immediately. The same should be true for trains and other forms of public transportation. This will cost Samsung more than just Billions of loss on this phone. They've severely tarnished their reputation and I'm betting even the most devoted Samsung customers will switch away to something else, even if its not an iPhone. This will end up costing them far more in the long run. All because they wanted to beat Apple's release of the iPhone 7. This just proves again, it doesn't matter who is first, it matters who does it best.
This is a very interesting time. I can't remember a recall of an electronic device of this magnitude because of exploding batteries. Considering the amount of portable electronic devices circulating the globe today, it's hard to believe this hasn't happened before, especially in cheap off brand devices. I would think the quality control of a company like Samsung would have avoided this.
I'm sure Apple (and most other companies) are upping their R&D expense to make sure this doesn't happen to them in the future! I think Samsung with survive this, considering they have their fingers in so many other products, but I can only imagine if Apple were to go through this, could be the end of the company given how significant the iPhone is to their overall company performance.
I just hope we don't hear of any deaths from these batteries. I can only imagine one of these catching fire while someone is driving down the freeway...