Samsung stops production of fire-prone Note 7

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Samsung stops production of fire-prone Note 7

Asks partners to stop selling the phones.

Samsung has suspended production of its flagship Galaxy Note 7 smartphones and asked partners to stop selling and exchanging the devices following reports of fires in replacement phones.

Top US and Australian carriers have already suspended sales or exchanges of 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.

Fires in phones that were meant to replace devices that had been recalled because of their propensity to explode would be a disaster for the world's largest smartphone maker, suggesting it had failed to fix a problem that has already hurt its brand and threatening to derail a recovery in its mobile business.

"If the Note 7 is allowed to continue it could lead to the single greatest act of brand self-destruction in the history of modern technology," said Eric Schiffer, brand strategy expert and chairman of Reputation Management Consultants.

"Samsung needs to take a giant write-down and cast the Note 7 to the engineering hall of shame next to the Ford Pinto."

In a regulatory filing, Samsung said it was "adjusting" shipments of Note 7s to allow for inspections and stronger quality control due to some devices catching fire.

It did not comment on the production halt or the cause of the fires, while a source - who declined to be identified because they were not authorised to speak to the media - did not explain whether specific problems had been identified or when production was halted.

A Samsung official earlier on Monday said the company was investigating reports of "heat damage issues" and would take immediate action to fix any problems in line with measures approved by the US Consumer Product Safety Commission.

Today the company said it would ask all global partners to stop sales and exchanges of the Galaxy Note 7 smartphones.

It asked all consumers using either an original or recalled Note 7 smartphone to power down and stop using their device.

On Sept. 2, Samsung announced a global recall of 2.5 million Note 7s due to faulty batteries which caused some of the phones to catch fire.

It ordered new batteries from another supplier and started shipping replacements to customers just two weeks later. But similar problems arose with a replacement Note 7 on Oct. 5, which began smoking inside a Southwest Airline flight in the United States.

Samsung shares, which have rebounded after an initial sell-off on the recall, closed down 1.5 percent, compared with a 0.2 percent rise for the broader market.

"I think the cleanest thing to do is to give up on the Note 7," said HDC Asset Management fund manager Park Jung-hoon, whose fund owns Samsung shares.

"What's scary is that this is causing people to repeatedly doubt Samsung's fundamental capabilities, so it's important for Samsung to get past this issue quickly."

At least three US owners of Galaxy phones that caught fire have sued Samsung in the last month, according to a review of dockets on Westlaw. Litigation could remain limited, given that the Samsung phones were on the market for only a few weeks before the company recalled them, and no deaths have been attributed to their use.

US telcos Verizon, AT&T, and T-Mobile, and Australian carriers Telstra, Optus, and Vodafone have all stopped replacing affected devices.

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