Just four weeks after the Galaxy Note 7 “phablet” was unveiled to rave reviews, Samsung has suspended sales worldwide and is recalling the first deliveries due to a number of phone batteries that exploded while charging.
With only 2.5 million delivered and potentially tens of millions of orders in the queue for the powerful and fully waterproof large format device, Samsung issued a total recall after 35 delivered phablets exploded while charging.
According to an unnamed Samsung official who spoke earlier to South Korea’s Yonhap News Service, the vast majority of Galaxy Note 7 phones should be unaffected, despite the sweeping recall. “Products installed with the problematic battery account for less than 0.1 percent of the entire volume sold,” said the official. “The problem can be simply resolved by changing the battery, but we’ll come up with convincing measures for our consumers.”
The recall will be one of the largest in history for the consumer electronics markets. After Koh Dong-jin, the head of Samsung’s handset division, confirmed that it was a “battery cell problem,” he gave no estimate for the cost of an exchange program. But he added that the amount is so big “it almost breaks my heart.”
The timing of the recall is a gift from heaven for Apple Inc., which is expected to be releasing its iPhone 7 on about September 7. Breitbart News recently reported that the weak performance of Apple’s stock price reinforced expectations that the iPhone 7, without a “disruptive” innovation, could be a major dud.
Apple stock has been underperforming the S&P 500 stock index since the price peaked at an all-time high of $133 per share in January 2015, following the wildly successful introduction of the iPhone 6 in September 2014. The record 74.5 million iPhone 6 smartphones sold during the quarter generated an $18 billion net profit for Apple, which topped the ExxonMobil profit of $15.9 billion in 2012.
Since then Apple iPhone shipments have fallen by 40 percent and the stock tanked by 35 percent to a low in May 2016. Although the shares rallied on the expectation of the release of the iPhone 7, industry experts have panned the specifications of the iPhone 7 as lacking the disruptive innovation needed for an $800-to-$900 product.
Samsung, as the world’s biggest smartphone maker, has accelerated the launch of its new phones in recent years to undermine Apple products by introducing innovations first. The strong sales trend in the June quarter for the standard sized Galaxy S7 smartphone allowed Samsung’s profit margin on mobile sales to reach 16 percent, the best since 2014.
Samsung’s “reservations and prepayments” for the large phablet-sized Galaxy Note 7 were the best in Samsung history. But a failure rate estimated at 24 per million shipped is not commercially sustainable.
Samsung went ahead with the release of the Galaxy Note 7 in China on September 1, because the batteries for those phablets from a different supplier.