It was starting to look as if things were turning around for Samsung. Restructuring proposals from activist investor Elliott Management and the expectation that it would beat Q3 profit estimates saw shares in the company jump 5 percent last week. But today the Note 7 debacle reached its lowest point: following reports that several of the replacement handsets have caught fire, Samsung is “temporarily pausing” production of the smartphone.
Early last month, Samsung said it would replace all Note 7s after it was discovered a faulty battery was causing the device to overheat and burst into flames. 90 percent of those who returned their handsets chose to receive a new Note 7, rather than a refund or similar smartphone.
On October 5, Brian Green was onboard Southwest Airlines flight 944 with his replacement Galaxy Note 7. With the battery at 80 percent capacity, he powered down the phone and placed it in his pocket when it began smoking. The aircraft was evacuated and the flight canceled.
More reports of replacement Note 7s catching fire have arrived recently, including incidents in Virginia and Kentucky, the latter of which Samsung knew about but didn’t say anything, according to The Verge.
In response to the defective replacement phones, AT&T, T-Mobile, and Australian carrier Telstra said they would suspend all sales and exchanges of Note 7s. Sources say Verizon has joined the other carriers in scrapping sales and replacements until Samsung and the Consumer Product Safety Commission carry out their investigations.
Samsung has now decided to temporarily stop production of the Note 7 while it attempts to discover why the replacement devices have the same dangerous faults as the originals.
The news is a disaster for Samsung, and could ultimately result in a worst-case scenario where the Galaxy Note 7 is pulled from the market altogether. Not surprisingly, the company’s shares have fallen almost 5 percent.
Last week it looked as if the Korean firm would be able to weather the storm caused by the Note 7 saga, now it seems the handset could be more of a disaster than initially thought for Samsung.