SEOUL (Reuters) – Samsung Electronics Co Ltd halted sales of its Galaxy Note 7 smartphones on Tuesday and told owners to stop using them while it investigates reports of fires, fuelling expectations the tech giant will scrap the flagship device.
Top US and Australian carriers on Monday suspended sales or exchanges of the Note 7s, while aviation authorities banned passengers using the phones, after smoke from a replacement device forced the evacuation of a passenger plane in the United States last week.
The world’s top smartphone maker said it had asked all global carriers to stop sales of the Note 7s and the exchange of original devices for replacements, while it worked with regulators to investigate the problem. The company is offering to exchange Note 7s for other products or refund them.
“Consumers with either an original Galaxy Note 7 or replacement Galaxy Note 7 device should power down and stop using the device,” the company said in statement.
Samsung’s decision to pull Note 7s off the shelves for the second time in less than two months not only raises fresh doubts about the firm’s quality control but could result in huge financial and reputational costs.
Analysts say a permanent end to Note 7 sales could cost Samsung up to $17 billion and tarnish its other phone products in the minds of consumers and carriers.
Investors wiped 15.4 trillion won ($13.8 billion) off Samsung Electronics’ market value in afternoon trade on Tuesday as shares down as much as 7.3 percent to a two-week low.
The premium device launched in August was supposed to compete with Apple Inc’s (AAPL.O) latest iPhone for supremacy in the smartphone market. Well received by critics, its first problem was a shortage as pre-orders overwhelmed supply.
But within days of the launch images of charred Note 7s began appearing on social media, in the first sign that something was seriously amiss with the gadget. Samsung has since recalled 2.5 million Note 7s due to faulty batteries.
South Korea’s Hankyoreh newspaper earlier reported the firm planned to end Note 7 sales permanently.