Samsung Electronics recalled its Galaxy Note 7 smartphones because of a faulty battery and announced a global replacement program, days before archrival Apple is set to unveil its newest iPhones.
Sales of the large-screen device will be halted in 10 countries, Koh Dong Jin, head of Samsung's mobile division, said Friday. He said there are about 2.5 million units in the hands of users and carriers as he apologized for the battery issue, which has been linked to explosions of the phone when charging.
The recall is a blow to Samsung's reputation and robs the company of momentum it had built in smartphones by capitalizing on a lull in demand for iPhones between new models. Demand for the iris-reading Note 7, which debuted to glowing reviews, and the release of the company's biggest profit in two years had driven its share price to a record as analysts raised their price targets.
"The unexpected recall would surely irritate buyers and the latest incident looks worrisome," said Lee Seung Woo, an analyst at IBK Securities in Seoul.
Mr. Lee expects shipments of the Note 7 this year will shrink to 12 million units from a previous estimate of 14 million units. He estimates the total number of handsets affected by the battery problem to be about 1 million, with about 600,000 units sold overseas.
The latest move came only days after Samsung delayed supply to carriers, citing a need for more testing. Media reports in South Korea cited users showing their charred Note 7s after they caught fire while charging. As of Sept. 1, there had been 35 cases reported globally on the battery cell issue, the company said in a separate statement. It will take about two weeks to prepare replacement devices, Samsung said.
Note 7 sales started two weeks ago. While the recall is a black mark for Samsung, it's a relatively quick response to a serious product defect. When the iPhone 4's antenna design proved to cause dropped calls, Apple responded by giving customers a free bumper case to mitigate the issue three weeks after it went on sale, an episode now known as Antennagate.
"Samsung chose to defend its reputation and its Galaxy brand over cost, which usually involves a lot of pain," said Kang Ho Park, an analyst at Daishin Securities Co.
Shares of Samsung rose 0.6% to 1,597,000 won on Friday before the recall was announced. Samsung SDI Co., its battery affiliate, closed unchanged.
Apple has invited journalists to an event in San Francisco on Sept. 7 where the world's most valuable public company is expected to introduce next-generation versions of the iPhone and Apple Watch.
-- Bloomberg News