Samsung recalls Galaxy Note 7 phones after battery fires

Tuesday, 6 September 2016 00:01 - - {{hitsCtrl.values.hits}}

SEOUL (Reuters): Samsung Electronics Co Ltd has recalled all Galaxy Note 7 smartphones equipped with batteries it has found to be fire-prone and halted their sales in 10 markets, denting a revival of the firm’s mobile business.

Koh Dong-jin, head of the South Korean company’s smartphone business, declined to comment on how many phones needed to be replaced, but said Samsung had sold 2.5 million of the premium devices so far.

Speaking at a news conference on Friday, Koh expressed regret over the recall, which will affect markets including South Korea and the United States. Models in China feature a different battery and are not being recalled by Samsung, the world’s biggest smartphone vendor.

The recall comes just over two weeks after the company launched its latest premium phone, which features an outsized screen and high-resolution camera. It follows reports of the 988,900 won ($885) phone igniting while charging.

The manufacturer plans to replace not only phones with faulty batteries sold to consumers, but also retailer inventories and units in transit. Nomura estimated that more than 1 million units have been sold to end consumers.

“I can’t comment on exactly how much the cost will be, but it pains my heart that it will be such a big number,” Koh said.

Strategy Analytics said the combined cost of the recall and lost sales would lop $5 billion off Samsung’s smartphone revenue this year and cut smartphone profit margin by 1.5%.

The scale of the recall is unprecedented for Samsung, which prides itself on its manufacturing prowess. While recalls in the smartphone industry do happen, including for rival Apple Inc , the nature of the problem for the Galaxy Note 7 is a serious blow to Samsung’s reputation, analysts said.

The company should act quickly to minimise damage to its smartphone recovery, after a string of product successes had reversed a fall in market share, they added.

The phone first launched in 10 markets in North America, Asia and the Middle East. Further roll-outs have occurred since in markets like China, where sales started just this week. Its wider availability, set for coming weeks, is now on hold.