Having tried and failed to make its fire prone flagship product – the Galaxy Note 7 – fireproof, Samsung has been forced to withdraw the smartphone from worldwide sale on consumer safety grounds. The giant South Korean electronics company had no choice but to admit defeat having failed to correct such a serious defect. Reports yesterday suggested it would no longer produce or market the device.
Why the smartphone went up in flames and whether an overheating battery was the sole reason remains unclear. Overheating batteries have previously caused problems for other electronics manufacturers: in 2006 both Dell and Toshiba withdrew some of their computer laptop models for similar reasons.
For Samsung, the financial impact is already significant. The company’s share price fell eight per cent in response to the news as $19 billion (€17 billion) was wiped off its market value.
Such a major setback could not have come at a less opportune time: both Apple and Google have launched new mobile handsets in advance of the peak holiday sales season and are well placed to exploit Samsung's difficulty.
The challenge now for Samsung is to regain consumer confidence quickly, to prevent contagion spreading to other products and to limit damage to its brand. But for the unlucky owners of the defective Galaxy Note 7, the outlook is poor.
They are left with an expensive smartphone they cannot use as it is a fire hazard. The phone has no resale value and – as yet – the owners cannot exchange it for other models should they wish to do so. And how they will be compensated for financial loss and inconvenience has yet to be decided.
As an exercise in crisis management, the exploding battery episode has proved a disastrous experience for Samsung, diminishing its credibility. The company first withdrew the phone, then failed to fix it despite claiming the battery issues had been resolved.
Such a damaging breach of trust with its customers will take time and great effort to restore. Reputation and consumer confidence are hard won but easily lost.