Samsung faces uphill battle in restoring credibility after Note 7 fiasco
SEOUL, South Korea — The fiasco of Samsung's fire-prone Galaxy Note 7 smartphones — and its stumbling response to the problem — have left consumers from Shanghai to New York reconsidering how they feel about the South Korean tech giant and its products.
Samsung Electronics said this week that it would stop making the Note 7 for good, after first recalling some devices and then recalling their replacements, too. Now, like the makers of Tylenol, Ford Pintos and other products that faced crises in the past, it must try to restore its relationship with customers as it repairs damage to its brand.
Samsung shares plunged as much as 8 percent in Seoul, their biggest one-day drop since the 2008 financial crisis, after the company apologized for halting sales of the Note 7.
“I'm in a state of ‘I don't know,' ” said Pamela Gill, 51, who works at Pratt Institute in New York City and likes her replacement Note 7.
“You're thinking, ‘Do I have to turn it in? Is it going to blow up?' ” she said.
Samsung, South Korea's biggest company by far, announced a global recall of the devices last month. It said a subtle manufacturing error in the batteries made the phones prone to catch fire. It offered to replace the devices.
But South Korea's safety agency said a new, still unidentified problem with the replacement devices makes them also likely to overheat.
Some consumers blame Samsung for not dealing decisively with the issue. Hahm Young-kyu, a 43-year-old South Korean office worker in Seoul whose wife is still using the Note 7, exclaims in frustration that the manufacturer tried to “cover up” the Note 7's failings.
Samsung's initial recall had a rocky start. After the first reports of overheating devices, it offered replacements, but not refunds. It waited a week before advising consumers to stop using the affected devices. And critics complained that some retailers didn't have up-to-date information until Samsung made a coordinated announcement with the U.S. Consumer Product Safety Commission.
“Ultimately, they did the right thing, which was to announce a full recall,” said Jan Dawson, a tech industry analyst with Jackdaw Research. But when the replacement devices also ran into trouble, he added: “That all goes out the window. Samsung's claims about fixing the problem are no longer reliable.
“Now they've got to demonstrate why potential buyers shouldn't worry about future Samsung devices,” Dawson said.
As one of the world's largest tech conglomerates, Samsung can afford to discontinue the Note 7, which was not its biggest-selling phone. While the cost of recalling devices and halting production will be enormous, it makes far more than that every quarter on sales of components for smartphones and computers.
But analysts say the new, unexplained Note 7 problems will inevitably hurt.
“A company's brand is their promise to consumers,” said John Jacobs, an expert on reputation and crisis communications at Georgetown University. “If you break that promise, you lose the customers. You lose their loyalty.”