Coverage: Samsung warns owners of Note 7 phones

Samsung is urging consumers to turn off Galaxy Note 7 smartphones and exchange them for another device amid a handful of reports of a battery cell problem that caused the units to catch fire.

Paul Davidson and Mike Snider had the news:

U.S. authorities urged users to switch it off and not to use or charge it during a flight. Several airlines around the world asked travelers not to switch on the jumbo smartphone or put it in checked baggage, with some carriers banning the phone on flights.

A Samsung investigation found that rechargeable lithium batteries manufactured by one of its suppliers were at fault in the fires. Samsung said it had confirmed 35 cases of the Galaxy Note 7 catching fire as of Sept. 1, most of them occurring while the battery was being charged.

There are at least two more cases that Samsung said it is aware of — one at a hotel inPerth, Australia, and another in St. Petersburg, Florida, where a family reported that a Galaxy Note 7 left charging in their Jeep had caught fire, destroying the vehicle.

The recall is abruptly cooling excitement for the new 5.7-inch pen-based phablet, which drew rave reviews. While pricy, at $850, it was applauded for water resistance, ability to unlock with the owner’s iris, and 64GB storage.

Alan Levin and Robert Fenner of Bloomberg note the news has caused Samsung’s stock to fall:

The troubles come at a critical time for Samsung. The company rolled out the Note 7 last month to give it a head start on Apple Inc.’s new iPhone, which were unveiled last week. But that advantage has now disappeared. Samsung shares fell as much as 5.5 percent, the biggest intraday drop since Aug. 24. Including a 3.9 percent decline on Friday, Samsung has shed about $19 billion in market value. Battery-making affiliate Samsung SDI Co. fell as much as 5.9 percent to 96,500 won, the lowest on an intraday basis in five months.

The recent introduction of new products by the two leaders of the global smartphone market are critical to their competition, Bloomberg Intelligence analyst John Butler said in an interview.

“Samsung’s troubles, and they’re meaningful at this point, are a positive development for Apple and its competitive position vis-a-vis Samsung,” Butler said. “We’re rolling quickly into the holiday quarter, so Samsung has to move quickly to recall the Note 7 devices with faulty batteries and get replacement units to people who already bought this model.”

The Suwon, South Korea-based company has already announced a voluntary, worldwide recall of all 2.5 million of the smartphones it has already shipped, at a cost to the company estimated at as much as $1 billion. On Saturday, Samsung told users in South Korea to stop using the devices and to bring them to the company’s service centers. Customers can rent replacement phones until Note 7’s with new batteries become available on Sept. 19. It wasn’t clear whether the fixed Note 7 models would also be offered elsewhere on that date.

Rhett Jones of Gizmodo reports that airlines are warning passengers not to use the phone in the air:

Samsung has stopped selling the phone and initiated a “product exchange program,” that would allow customers to return their potential phone bombs. After being criticized for not issuing an official recall, Samsung now says that it is working with the Consumer Product Safety Commission. The latest statement from the company puts things more clearly: “We are asking users to power down their Galaxy Note7s and exchange them now.”

On Friday, the US Consumer Product Safety Commission issued an official statement urging people not to use the Note 7.

The FAA has issued a warning to passengers in which it strongly advised them to not turn on or charge the phone during a flight. The United Arab Emirate’sGeneral Civil Aviation Authority has banned the use of the device on the plane, as have Scandinavian Airlines, Virgin Australia, Singapore Airlines and more.Pakistan International Airline “strongly advised” passengers not to take the phone onboard, “not even in their check-in luggage, as it may compromise aircraft and passenger safety.”