Samsung trips in race to recall troubled phones

It was supposed to be a dramatic — but quick — recall. Samsung Electronics said two weeks ago that it would recall 2.5 million units of its new high-end smartphone, the Galaxy Note 7, just days after some customers said their phones had caught fire.

The recall is the largest in the history of the smartphone industry, but it also won Samsung praise from some in the gadget industry for the South Korean company’s speed and decisiveness.

Today, the recall looks anything but smooth. Safety regulators in the United States have issued warnings in recent days cautioning consumers not to turn on their Note 7s on airplanes — and not to use their phones at all. South Korea’s flight regulator, in a reversal, followed suit, as have others around the world.

The constant reminders of potential combustibility have further dented Samsung’s reputation and shaved as much as $14 billion off its market value, just when it looked to be gaining ground on Apple, its longtime rival, with its new line of sleek Galaxy smartphones. They also raise questions about whether Samsung’s rush to take back the phones created more problems.

Experts say it led to a ham-handed effort that confused customers, frustrated regulators and continued to generate headlines both in the US and at home. Data from the mobile analytics firm Apteligent showed that while Samsung’s recall appears to have stopped new sales of the phone, the majority of people who have affected phones are continuing to use them.

“I thought, ‘How is it that this is happening?’” said Jennifer Shecter, a spokeswoman for the nonprofit consumer advocacy group Consumer Reports. She said the group found an inconsistent response to the recall across America, with some stores and carriers still selling the phones days after Samsung’s announcement.

“Samsung made an announcement, but the government wasn’t involved, there wasn’t a clear message, there wasn’t an approved remedy and there wasn’t a clear fix,” she said. A Samsung spokeswoman declined to comment on its discussions with regulators, pointing only to a company statement that said it was working with the United States Consumer Product Safety Commission.

The recall is an embarrassing comedown for Samsung, an icon of South Korean innovation that accounts for one-fifth of the country’s exports. Its importance can lead to deference from regulators, experts say.

South Korea’s flight regulator recommended last week that airline passengers not use or charge their Note 7 phones on flights only after the US Federal Aviation Administration made the same recommendation. Flight regulators in Europe, Japan, India and elsewhere have issued similar notices.

The situation is “regrettable,” said Kang Jeong-hyeon, deputy director of the flight standards division of South Korean Ministry of Land, Infrastructure, and Transport. He said the ministry initially had not acted because Samsung informed the ministry that the risks were manageable. But when the United States made its recommendation, South Korea had no choice but to follow, Kang said.

“As the authority in the country, the ministry felt concerned about the repercussions, and also, should S Korea be the first to ban the gadget on airplanes,” he said. Samsung confirmed that company representatives had met with the ministry but declined to comment further.

Korean consumer safety regulators say the company’s effort had complied with South Korean law, and Samsung has taken additional steps in recent days to minimise the damage. Last week it issued a software update that would keep the Note 7 from fully charging, reducing the risk of overheating. It has also bought advertising in American and South Korean media.

Samsung has not given specifics about how many affected phones are in which markets, but many of the affected phones were most likely sold in critical markets where the company ships phones first, like the US, South Korea and European countries such as Britain.

In the United States, the Consumer Product Safety Commission requires companies to notify it of defects and to coordinate public notification of recalls. The commission also asks the companies to work with it to determine how to notify customers and coordinate how the defective products can be replaced or returned.

But when Samsung said on Sept 2 that it would replace 2.5 million Note 7s, it issued a news release by itself. It set up its own website telling Note 7 users to go back to where they had bought the phones or to contact its call centre.

Recall notice
The US agency still has not issued a formal recall notice. In a Sept 9 statement, it warned consumers not to use the phones at all. It also said it was working with Samsung to announce an official recall. In Hong Kong, Samsung initially told consumers they would not be affected because the models there used a different battery. A day later, it said about 500 would be affected after all.

Experts say Samsung’s desire to deal with the problem quickly may have created confusion. Kim Jinbaek, a professor at the School of Business at Chung-Ang University in Seoul and a former Samsung employee, cited the example of Toyota Motor in Japan, which was criticised beginning in 2009 for dragging its heels in what turned out to be a major safety recall. At that time, Kim said, Toyota was in discussions with US safety regulators. “Samsung, on the other hand, decided not to wait through such coordination,” he said.

Adding to the confusion, Samsung in its initial statement said it would replace the phones, avoiding use of the more damaging word “recall.” Samsung also did not advise users to stop using the phones altogether until Sept 10.

Samsung’s own employees called on the company in an internal electronic bulletin board to act swiftly, according to local media reports that were confirmed by the company. The service allows employees to post messages anonymously.

“We want you to make the best decision so that we don’t feel ashamed before our customers who use the Galaxy phablet smartphones,” one posting said, using a word for big phones like the Note 7 that approach the size of the tablet.

“The company owes much to the customers who pre-ordered our phones or purchased them,” read another. “Our future lies in how well we treat these loyal customers.”