By Se Young Lee
SEOUL Samsung Electronics Co Ltd (005930.KS) 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 U.S. and Australian carriers on Monday suspended sales or exchanges of the Note 7s, while major airlines reiterated bans on 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."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 underscores the South Korean firm's struggles to fix the over-heating issue.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, and the latest reports of fires in replacement devices is raising fresh doubts about the firm's quality control procedures. "This has probably killed the Note 7 brand name, who knows if they’ll even be allowed to re-release it," said 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." CAUSE UNKNOWN
Samsung did not immediately comment on whether it was considering ending Note 7 sales permanently or whether it had identified the cause for the fires in replacement devices. The company is offering to exchange Note 7s for other products or refund them.A person familiar with the matter told Reuters on Monday Samsung had temporarily halted production of Note 7s and Samsung said it had adjusted shipments of the phones.
The Korean Agency for Technology and Standards met with Samsung Electronics and experts Monday afternoon and "confirmed the possibility of defects in the new (Galaxy Note 7) product," the agency said in a statement on Tuesday. "Samsung is investigating the case in various aspects," including the batteries and other possible causes, an official at the agency told Reuters. "It is more difficult to analyse the cause of the accidents this time because of various patterns of the accidents."The U.S. Consumer Product Safety Commission said Samsung was making the right decision by halting sales and exchanges of the device."No one should have to be concerned their phone will endanger them, their family or their property," CPSC Chairman Elliott Kaye said in a statement.
"While we continue our active investigation into reports of phones overheating and burning in multiple states, consumers should power down and stop using all Galaxy Note 7s. This is the safest course of action." South Korea's transport ministry on Tuesday added its voice to concerns from the aviation industry, issuing a statement saying no Note 7s should be used or charged inside airplanes."Verizon Communications Inc (VZ.N), the largest U.S. wireless carrier, said it may shift marketing away from the Note 7 heading into the critical holiday selling season."We have the new iPhone, we’re about to launch the new Google (GOOGL.O) Pixel, which is exclusive to us. We’ve got great phones from Motorola as well," Verizon spokeswoman Kelly Crummey said. "I think you’ll see our marketing focused on those devices because there is certainty on those at this time." Shares in Samsung, which had rebounded after an initial sell-off on the recall, were down 3.6 percent as of 0100 GMT, compared with a 0.1 percent rise for the broader market. Apple shares, in contrast, hit their highest in 10 months on Monday on expectations the iPhone maker would benefit from its rival's woes. (Additional reporting by Deborah Todd in NEW YORK and Hynjoo Jin in Seoul; Writing by Lincoln Feast; Editing by Stephen Coates)
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