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Samsung Note7 recall could hurt brand, or not

Matt Hamblen | Sept. 19, 2016
U.S. consumer product safety agency is working with Samsung over formal recall

Samsung's recall of Galaxy Note7 smartphones over reports that dozens caught fire might have a lasting impact on the company's image.

Or not, depending on which analyst you ask.

"What more can a vendor do than a complete recall?" asked Patrick Moorhead, an analyst at Moor Insights & Research. "This is exactly what Samsung did. All I'd say is that that they could have sent out the 'power down' message a few days earlier and maybe sent that through the carrier text network like a weather alert."

In fact, Samsung issued a global recall of Note 7s on Sept. 2. From the start, however, there was confusion about whether that recall meant users should immediately stop using the smartphones or charging them, since the fires were traced to problems with lithium ion batteries. About 2.5 million Note 7s were reportedly sold at the time of the Samsung recall, with 35 initial reports of fires.

About a week later, on Sept. 10, Samsung updated its advice and urged Note7 users in the U.S. to "power down" the device and "exchange it now."

Samsung said consumers should visit the store where they purchased the device to obtain a replacement Note7, pending approval of the replacement device by the U.S. Consumer Product Safety Commission (CPSC). Samsung listed phone numbers and emails for five U.S. carriers to make the exchanges. Customers could also receive a Galaxy S7 or Galaxy S7 Edge as a replacement, Samsung said.

As of Wednesday, there was no formal CPSC recall for the U.S. or a CPSC approval of a replacement device. A software upgrade to lessen the power that could be charged to a Note7 in use in South Korea also hadn't been approved for use in the U.S. Meanwhile, the Wall Street Journal reported that the CSPC is expected to announce a formal recall later Thursday.

A statement from the CPSC, dated Sept. 9, said the agency was "working cooperatively" with Samsung to formally announce an official recall.

The CPSC requires a company to notify the agency of a recall within 24 hours of discovering a serious defect. The CPSC has made no comment about whether there will be any enforcement action against Samsung, nor has it commented on how long Samsung took to inform the CPSC of the defect.

There are some reports and tweets of Note7 customers not being able to make exchanges as recommended, but some analysts said there didn't seem to be a tremendous backlash for how Samsung was handling the problem.

"I think the damage to Samsung will be short term," said Jack Gold, an analyst at J. Gold Associates. "Samsung has been giving out some statements and instructions to consumers. The actual number of Samsung devices overheating is fairly small. That's not to say that Samsung shouldn't fix the problem as quickly as they can and recall all the affected devices. But I don't think this will have long-term negative consequences for Samsung as a brand as long as they keep making phones that people want to buy."

 

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