After the South Korean tech giant urged customers over the weekend not to use its flagship yet fire-prone smartphone, investors massively sold Samsung shares, wiping off billions of dollars in value.
Shares in Samsung Electronics dived more than 7 percent on the Seoul stock market in trading on Monday in what has been the stock’s biggest one-day loss in years, wiping off an estimated $12 billion (10.8 billion euros) of the company’s market valuation.
The plunge came after the world’s biggest smartphone maker by volume told customers worldwide to immediately “power down the Galaxy Note 7 and exchange them as soon as possible.”
On Sept. 2, the company already announced an unprecedented recall its oversized “phablet” after faulty batteries caused some handsets to burst into flames during charging. Since then, airlines and air safety agencies around the world have warned passengers against using them on flights.
According to Hwang Min-Sung, an analysts with Samsung Securities, the recall in 10 countries might slash the firm’s profit by more than 1 trillion won (7.9 billion euros, $8.9 billion) this year.
“The whole situation over Samsung is becoming more serious and complicated as more state authorities around the world are advising nationals to stop using the Note 7,” he told the news agency AFP.
Under pressure from Apple’s iPhone in the high-end market and Chinese rivals in the low-end segment, Samsung launched its latest smartphone model earlier than expected to get a headstart on Apple’s new iPhone 7 launched Sept. 7.
According to Samsung, the fault rate for the Note 7 amounts to 24 handsets per million and it would take about two weeks to prepare replacements. The company advised consumers to use replacement phones which would be loaned by the firm until a new Note 7 equipped with fault-free batteries was provided.
Growing concern over the device prompted air carriers and aviation authorities in countries including the US, Australia, Canada, Japan, Singapore, Indonesia and India to ban the use of the Note 7 durig flights.
But cases of exploding batteries continued to emerge following the recall announcement, as users claimed a burning device had damaged a hotel room in Australia or set a car in the US on fire.
In a widely-reported case last week, a Florida man allegedly saw his car catch fire after he had left a Note 7 charging inside it, with images on social media showing a Jeep engulfed in flames.
Samsung currently uses batteries made by a number of different companies including its sister Samsung SDI. The firm refused to identify the supplier of the faulty battery but said sales in China, where it uses a different supplier, would be unaffected.
uhe/cjc (AFP, Reuters, dpa)