Samsung Electronics (OTCMKTS:SSNLF) attempted to protectively ringfence its brand on Tuesday as it confirmed it is killing off the Galaxy Note 7 smartphone after it was involved in dozens of fires and explosions worldwide.
In a regulatory filing in South Korea late on Tuesday Seoul time, the firm said it had made the decision to permanently stop production, for the sake of consumer safety.
The volte-face came after the company said it was cooperating with US authorities on safety checks to its Note 7 devices.
On Monday, Samsung said it was “adjusting production” - an admission that many saw as the first steps towards killing off the phone entirely.
Samsung said customers will still be allowed to apply for a full refund or to swap their Note 7s for other Samsung products. It also advised all customers with an original or replacement Galaxy Note 7 to “power down and stop using the device” immediately.
In discontinuing the phone, Samsung follows the advice of many analysts who saw it as a lost cause, and who argued that the company’s priority should be protecting the rest of its brand.
But the issues for Samsung may not end there.
Contractually, a faulty appliance usually means just a refund for consumers. But in the hotly-competitive smartphone marketplace things are a little different. For one thing, Samsung may have to offer additional compensation to customers who might be tempted to walk to rival iPhones made by Apple Inc (NASDAQ:AAPL) and indeed Apple’s share price on Monday reflected the prospect of new custom.
But for another, Samsung now is faced with the prospect that users claim lost data, especially if they used a faulty handset. Given the extent to which the phones have fried means that internal data, including expansion cards or SIM cards used to store data, may be rendered beyond use. If, for any reason, consumers had not backed up their data – still a user option not a default – there is a possibility that one of the most invaluable things – data and personal photographs – may be lost permanently.
Meanwhile, rumours are swirling about Samsung Electronics Galaxy S8, the next generation of phone. The phone is expected to be launched as soon as February 2017 as the company looks to erase all memory of the 7 generation.
The Galaxy S7 and S7 Edge, to be fair, have been solid additions to the production line, but the Note 7 is now an image breaker that the company needs to impress with the next launch, and soon, if it is to avoid a haemorrhage of consumers.
Samsung is said to be working with Qualcomm Inc. (NASDAQ:QCOM) to integrate the brand new Snapdragon 830 chip in the phone. Although there is no word about the battery.