South Korean mobile phone and technology company Samsung are estimated to spend as much as $1billion (£750million) after big problems with its new release, Galaxy Note 7. Samsung bosses have taken the decision to replace all of the 2.5 million smartphones already shipped.
Some of the phones already shipped have faulty batteries which has led to a small percentage having caught fire and exploded. This has led their owners to take to social media in anger posting photos of charred devices as they had burst into flames while charging.
These faults, and the bad publicity that comes with it, are particularly bad for a device which has received rave reviews from the tech press. It also follows the success of the Galaxy S7 and S7 Edge which have driven up share prices and profits for the company over the last quarter, to their highest level in the last two years.
The Galaxy Note 7 was set to challenge Apple as they release their iPhone 7 this month. However, Samsung now find themselves in a financial position they were not expecting.
It is not a great development for the company but the impact is estimated to be less than 5% of the company’s projected net income for 2016.
The real problem comes with impacts on PR and the brand as a whole. It remains to be seen if this battery fault will have any short term or lasting impacts on sales of Samsung products in the UK and further afield.
Samsung seem to be committed to repairing any potential damage to their brand. They are replacing all Galaxy Note 7’s that are already on the market whether they have caught fire or not.
A spokesperson for Samsung had this to say about their approach to the current situation; “Samsung is committed to producing the highest quality products and we take every incident report from our valued customers very seriously… because our customers’ safety is an absolute priority at Samsung, we have stopped sales of the Galaxy Note7.”
Demand for the Note 7 was exceeding supply before it went on sale creating a supply shortage that delayed the phone’s launch in some markets. Currently, there is no information regarding when the new and improved Note 7’s will be on sale.
The Galaxy Note 7 contains plenty of features that have impressed technology journalists and that gained it that ‘must have’ status. It remains to be seen how sales will go once the new devices reach the market.
Regardless, Samsung have handled what could have been a PR disaster in a quick, efficient and thoughtful manner. They were quick to place the needs of their customers at the heart of their actions. This is something all businesses need to keep in mind should something like this ever happen to them.
References and further reading
Samsung Galaxy Note 7 Header picture from Forbes (Photo Credit: Ian Morris)
Samsung Galaxy Note 7 Content picture from Forbes (Photo Credit: Ian Morris)