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How Samsung Botched Its Galaxy Note 7 Recall
U.S. Consumer Product Safety Commission announces recall of Samsung phone
Korean tech giant Samsung is trying to replace some of the 2.5 million smartphones it has recalled in 10 countries, citing fire-prone batteries. The recall has hit its market value.
By GEORGIA WELLS , JOHN D. MCKINNON and YUN-HEE KIM
Updated Sept. 16, 2016 12:06 a.m. ET
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Samsung Electronics Co., faced with exploding batteries in some of its top-selling phones, exacerbated the situation in the way it communicated with regulators and consumers, say former U.S. officials and people familiar with similar product recalls.
The discovery that batteries on the Galaxy Note 7 smartphone could ignite created a tricky task for Samsung: orchestrate a recall of 2.5 million devices spanning 10 countries for a product that is increasingly essential to daily life.
But the effort has been dogged by conflicting information and Samsung’s failure at the outset to coordinate efforts with U.S. safety authorities, according to former officials with the agency.
That led to delays in providing replacement devices and resolving the problem for customers in the U.S., where Samsung has sold 1 million of the devices and is trying to expand to narrow the gap with Apple Inc.
The two sides are working together now, and the U.S. Consumer Product Safety Commission made a formal recall of the device on Thursday.
CPSC Chairman Elliot Kaye suggested the CPSC action was delayed because of the company’s decision to pursue its own global voluntary recall. “As a general matter it’s not a recipe for a successful recall for a company to go out on its own,” he said.
The U.S. recall sets a framework that Samsung, phone carriers and retailers all must follow, the CPSC said. Mr. Kaye urged consumers to take advantage of the recall right away “because this product represents such a serious fire hazard.”
The agency said users can request a Galaxy Note 7 with a different battery, a refund or a new replacement device.
Samsung said replacement phones would be available by Sept. 21. “To our Note 7 owners, if you have not yet replaced your original Note 7, please, please power it down and return it,” President of Samsung Electronics America Tim Baxter said in a video statement.
U.S. carriers have begun offering to take back the phone and provide replacement devices, but some customers had run into trouble with such returns. Unlike Apple, Samsung mainly relies on carriers to sell its phones as it doesn’t have a large network of retail stores in the U.S.
The company’s confused response dented Samsung’s credibility with customers in the U.S., one of Samsung’s biggest markets, particularly with longtime fans such as Michael Lees, 51, of Wallingford, Pa.
“They want you to return your phone, but that’s just not an option for me,” said Mr. Lees, who uses his smartphone to manage an equipment database for a packaging company.
Samsung has offered loaner phones, but Mr. Lees said he would have to invest “a week of time getting that ready, and then I’m going to get a replacement phone and have to set that up again.”
Since the phone’s launch last month, Samsung has received 92 reports of the batteries overheating in the U.S., including 26 reports of burns and 55 reports of property damage, according to the CPSC.
Mr. Kaye said other Samsung phones are now being investigated for overheating issues, but he provided few details.
With smartphones so essential to the daily lives of their users, some analysts say the recall could hurt Samsung’s credibility for years to come in the U.S., where it has spent billions of dollars to beef up its brand image through advertisements and product placement at events such as the Academy Awards.
“The U.S. is Samsung’s biggest smartphone market so the company must fix any problems there as a top priority,” said Neil Mawston, an analyst at Strategy Analytics. “Samsung cannot afford to lose an inch of competitive ground to Apple in its home U.S. market.”
The U.S. accounted for 15% of all Samsung smartphone shipments worldwide in the second quarter.
Samsung launched its top-of-the-line Galaxy Note 7 smartphone on Aug. 19, bringing it to market just ahead of Apple’s iPhone 7. Two weeks later, it was forced to launch the global recall because of faulty batteries that could explode while charging.
In announcing the recall, however, experts say, the South Korean company neglected to first coordinate with safety authorities in the U.S. According to U.S. law, the CPSC must be notified within 24 hours after a safety risk has been identified, and recall announcements are generally then carried out jointly.
The U.S. agency didn’t issue a statement until Sept. 9, a week after Samsung’s initial announcement.
“This is completely unusual; companies just don’t issue recalls without the CPSC,” says Pamela Gilbert, a partner with Washington’s Cuneo Gilbert & LaDuca LLP and a former executive director of the CPSC.
The delay in a formal recall stemmed from questions about the precise problem with the phones and how best to correct it, according to a person working for a major U.S. carrier with knowledge of the situation.
In response to the criticism, Samsung had said it was working with partners and carriers in each market to execute exchange programs as quickly as possible.
Even so, Samsung’s message to U.S. consumers has been unclear in other ways.
In an initial statement on its U.S. website on Sept. 2, Samsung said there were battery issues with the phone, but didn’t detail the problem, nor did it advise customers to turn off their phones. It also said owners could exchange their phones as early as that week.
A week later, Samsung revised the release, advising people to turn off their phones and saying exchanges would be available “pending CPSC approval.”
Compounding the confusion, some customers say they were given contradictory information when they went to exchange their devices.
Manny Mendez, an information technology consultant in Miami said a Samsung representative told him on the phone that he could get a loaner phone from his carrier.
He said he went to a T-Mobile store but was unable to get a loaner.
“I love my Note 7, but this is a freakin’ headache,” Mr. Mendez said.
Samsung has sent some replacement Galaxy Note 7 phones to carriers, but the carriers weren’t allowed to distribute them to customers until the CPSC approved them, according to the person working for the large U.S. carrier.
“Samsung is committed to producing the highest-quality products, and we take every incident report from our valued customers very seriously,” the company said Thursday.
In South Korea, Samsung is releasing a software update that limits how much users can charge the phones—a bid to reduce the risk of the phones catching fire by limiting the maximum battery charge to 60%.
In China, Samsung recalled a limited number of test devices, which will be replaced with new models.
—Nathan Olivarez-Giles, Trisha Thadani and Eva Dou contributed to this article.
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