Samsung ends Note 7 production, may kill off entire line

© Bertrand Guay
Samsung is ending the production and sale of its troubled Galaxy Note 7 smartphone. The company has urged customers to switch off their Note 7s and return them for refunds.

Stock of the South Korean technology giant plunged over eight percent at the close of trade in Seoul, washing billions off its value. The recall of the handset may cost the company as much as $17 billion, which is what Samsung expected to earn during its product cycle.

Last month, Samsung announced the recall of 2.5 million Galaxy Note 7 smartphones after reports of devices overheating and catching fire appeared worldwide. The company blames a faulty battery while awaiting the results of an investigation by US safety regulators.

Experts had expected the firm to restart global Note 7 sales in the fourth quarter. However, Samsung announced permanent halting sales of the handset.

The step has killed the Note 7 brand name, according Edward Snyder, managing director of Charter Equity Research.

“By the time they fix the problem they have to go through recertification and requalification and by the time that happens, they're going up against the (Galaxy) S8 launch,” he said, as quoted by Reuters.

According to analysts, the world's top-selling smartphone firm should scrap the troubled Note 7 and move on to successor models to stem financial losses and limit its reputational damage.

“In the worst case scenario, the US could conclude the product is fundamentally flawed and ban sales of the device,” said Song Myung-sub, an analyst at HI Investment Securities, as quoted by Reuters.

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Industry experts also warn over the possible long-term impact on the company’s reputation and brand.

“We think the Note 7 incident may hurt demand for Samsung's other smartphone models as well,” Reuters quotes an analyst from Japanese brokerage Nomura as saying.