Tech giant Samsung has recalled all of its new flagship Galaxy Note 7 devices amid reports that some of the premium phones are catching fire due to battery problems, said a Samsung source on Friday.
While analysts expect the Note 7 problems to be resolved quickly, ongoing major problems could derail Samsung’s mobile recovery after a string of product successes had reversed the smartphone leader’s declining market share.
The South Korean firm has pinned its hopes on the Note 7 to maintain strong sales momentum in the second half against stiffening competition from the likes of Apple, which is expected to release its latest iPhone next week.
On Wednesday Samsung said it had halted supply of the new phone to the top three South Korean carriers and that shipments were being delayed as it conducted additional quality testing.
It did not elaborate on any problems it may have found with the gadget, which was launched in South Korea and other markets on Aug. 19 and has been generally well-received by critics.
Investors stripped about $7 billion off Samsung Electronics’ market value in response to the shipment delays on Thursday, but sentiment appeared to have recovered in Friday trading. The shares rose 0.6 percent compared with a 0.3 percent gain for the broader market.
Samsung said in a statement to Reuters it was “conducting a thorough inspection” with its partners on the Note 7 and would share its findings as soon as possible. The company did not immediately comment on Yonhap’s report.
Credit Suisse said a recall or major shipping delays could wipe 1.5 trillion won ($1.34 billion) off the firm’s 2016 operating profit estimate of 30.2 trillion won.
But the brokerage said this was the “absolute worst case” scenario and was unlikely to materialize, as it expected the firm to resolve issues with the phone before the fourth quarter.