Samsung Electronics Co Ltd’s mobile recovery was under pressure yesterday after it delayed shipments of its premium Galaxy Note 7 smartphone amid reports of exploding batteries, wiping about US$7 billion off its market value.
Investors drove the stock to two-week lows after the global smartphone leader on Wednesday said the shipments had been delayed for quality control testing, and that shipments to South Korea’s top three mobile carriers had been halted.
Faults with the new flagship device could deal a major blow to the South Korean giant, which was counting on the Galaxy Note 7 to maintain its strong mobile earnings momentum against Apple Inc’s new iPhones expected to be unveiled next week.
“This is some major buzzkill for Samsung, especially given all of the hard-earned excitement that products like the Note 7 have been garnering lately,” IDC analyst Bryan Ma (馬伯遠) said. “The pending Apple launch puts all the more pressure for them to contain this quickly. The timing of this couldn’t have been worse.”
Samsung did not comment on what problem it was trying to address or whether other markets were affected besides South Korea.
Sister company Samsung SDI Co Ltd said that while it was a supplier of Galaxy Note 7 batteries, it had received no information to suggest the batteries were faulty.
Several people posted images and videos of charred Galaxy Note 7s online and said their smartphones had caught on fire.
“Be careful out there, everyone rocking the new Note 7, might catch fire y’all,” one user said in a YouTube clip showing a burned Note phone.
Samsung’s shares, which hit a record high of 1.694 million won last week, dropped 2.5 percent as of 2:08pm in Seoul, and Samsung SDI tumbled 6.1 percent, versus a 0.2 percent fall for the broader market.
Last year, production problems for the curved displays for the Galaxy S6 edge model resulted in disappointing sales, and Samsung risks a repeat this year if it cannot address the Galaxy Note 7 problems quickly.
Its mobile profit is on track to post annual growth for the first time in three years, thanks to robust sales of the Galaxy S7 and S7 edge devices that it launched in March to critical acclaim.
The Galaxy Note 7 received similar praise, raising expectations for strong sales in the second half.
Samsung last month said demand for the new handset, priced at 988,900 won (US$882) in South Korea, was far exceeding supply, pushing the firm to delay the launch in some markets.
Though a components pick-up would buttress overall profits, HDC Asset Management fund manager Park Jung-hoon said mobile operating profit might decline by up to 200 billion won between July and this month.
The mobile division accounted for about 54 percent of Samsung Electronics’ January-to-June operating profit of 14.8 trillion won.
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