A timeline of events
The saga first began soon after the Galaxy Note 7 went on sale, and initially it was unclear exactly what was happening.
On Aug. 31, 2016, Yonhap News reported that Samsung had temporarily suspended deliveries of Note 7 devices to major South Korean mobile carriers including SK Telecom, KT, and LG Uplus. Initially, the company was reluctant to acknowledge the delay. “We are checking whether the deliveries were halted or not,” a Samsung official told the publication.
Early speculation pointed to a mechanical flaw involving the S-Pen, the proprietary stylus that ships with the Note 7. YouTube videos and reports on the web appeared to show a problem with the S-Pen’s handset slot — the ejection button used to remove the pen had a tendency to become stuck on some units. Samsung acknowledged the issue on Wednesday, began offering free replacements to affected customers, and instructed owners that hadn’t experienced the issue “not to push too hard” in the S-Pen’s housing “after the click sound.”
But evidence of a far more serious — and dangerous — problem began to emerge early this week: the potential for Note 7 devices to explode while connected to a wall charger. One documented account on social media, a YouTube video posted by user Ariel Gonzalez, appeared to show a Note 7 warped almost beyond the point of recognition.
“Came home from work, put it to charge for a little bit before I had class,” he said. “Went to put it on my waist and it caught fire. Yup. Brand new phone, not even two weeks old. Be careful out there, everyone rocking the new Note 7, might catch fire.”
A South Korean schoolteacher, Park Soo-Jung, told the Associated Press that her Galaxy Note 7 “burst into flames” unexpectedly, filling her apartment with smoke. “If the exploded phone in flame was near my head, I would not have been able to write this post.”
And posts on Korean social media appeared to corroborate reports. Most showed Note 7 units with severely damaged screens and charging ports.
In response to the growing chorus of concern, Samsung confirmed to Yonhap News on August 31 that it had delayed Note 7 shipments in order to conduct “quality control” testing. “The most important thing is the safety of our customers, and we don’t want to disappoint our loyal customers,” a company official said.
The results of those tests, the company said, were consistent with reports: some Note 7 units could explode while being charged. “[We] conducted a thorough investigation and found a battery cell issue,” it said in a statement on Thursday. “Samsung is committed to producing the highest-quality products and we take every incident report from our valued customers very seriously.”
The company indicated the problem wasn’t widespread — a representative told Yonhap news that Note 7 units with faulty batteries accounted for “less than 0.1 percent of the entire volume sold” — but not necessarily easy to resolve. Samsung said the issue “couldn’t be [fixed] by changing the battery.”
Out of an abundance of caution, Samsung announced a broad recall on September 2. “The problem can be simply resolved by changing the battery, but we’ll come up with convincing measures for our customers,” a spokesperson for the company said. “For customers who already have Galaxy Note 7 devices, we will voluntarily replace their current device with a new one over the coming weeks.”
That recall, however, might not be the last we hear of the issue. U.S. investigators promptly announced that they were investigating the issue, and Sprint said that it would allow users to swap in their phone for another device while the investigation was ongoing.
That recall, however, wasn’t the last we heard of the issue. U.S. investigators said they were looking into reports of the replacement device exploding, after which multiple reports of replacement phones catching fire popped up. Finally, Samsung issued a statement saying that production on the phone had been halted and that users should immediately power down their phones.
The New York Times suggests that Samsung still does not know what caused issues in the Note 7, and they have been unable to reproduce the problem in tests.
The US Consumer Product Safety Commission and Samsung have issued a second recall for the Note 7.
Separately, the Department of Transportation, along with the Federal Aviation Administration (FAA) and the Pipeline and Hazardous Materials Safety Administration (PHMSA), announced on Friday, October 14, that all Samsung Galaxy Note 7 devices would be banned from airplanes in the U.S. “Individuals who own or possess a Samsung Galaxy Note 7 device may not transport the device on their person, in carry-on baggage, or in checked baggage on flights to, from, or within the United States,” the agency said. “This prohibition includes all Samsung Galaxy Note 7 devices,” the agency said, noting that the phones also can’t be shipped as air cargo.
How will this affect Samsung?
The Galaxy Note 7 recall is one of the industry’s largest in history, and obviously a major setback for Samsung. But it’s unclear how drastically it will impact the company’s bottom line — or reputation, for that matter.
Samsung was expected to sell as many as 15 million Note 7 phones this year, or almost double the 9 million Note 5 units it shipped last year. And before news of a widespread recall, it appeared well on its way to hitting that mark: the company said it sold 400,000 units in the first week of the Note 7’s availability and that demand had generally outstripped supply.
Samsung’s 2016 revenue bested expectations, too. The company reported a rise in second quarter operating profit to $15 billion — up 15 percent from the same period a year earlier. And it gained market share at the expense of rivals like Apple, nabbing 22.4 percent of smartphone sales — a five percent jump — thanks to higher-than-anticipated “demand for higher-end phones,” according to market analysts at IDC.
In light of the newest developments, though, some analysts expect a reversal. Park Jung-hoon, an asset fund manager at HDC, told Reuters that that Samsung’s profits would fall short of initial projections. He anticipates a decline in mobile operating profit by up to 200 billion won — or roughly $179 million — in the fiscal period between July and September.
Samsung shareholders stopped worrying too much when news that Samsung’s profits are expected to rise hit in October, according to the Wall Street Journal.