Samsung Finally Pulls the Plug on Note7 but After a Great Cost to Many

NEWS ANALYSIS: After a series of poorly managed recalls and supply chain problems, Samsung starts to permanently get rid of the dangerous devices, but the cost to all involved is significant.

Samsung note7

It wasn't supposed to be this way. When Samsung introduced the Galaxy Note7 back in August, this new smartphone was intended to give the Korean giant a head start on the much anticipated iPhone 7 that was due out the following month. Instead, the Note7 became the definition of a product that should never have been brought to market in the form that it took. For the first time in history, airlines specifically warned their passengers against using the phone on board and television news crews flocked to reports of exploding devices.

And now Samsung is permanently stopping production of the Note7 thanks to too many reports of exploding batteries.

Exactly how this happened is still conjecture. Was Samsung in too much of a rush to beat Apple that it failed to test its devices properly? Did the urge to contain costs mean that Samsung's supply chain introduced defective materials? Was it some of both?

Regardless of how it came to be, the Samsung Galaxy Note7 has become a story so seared in the memory of everyone involved with mobile technology that it's sure to tarnish the company's reputation, much as Apple's problems with the iPhone 4 antenna followed it for years. For Samsung, the question has now become how to recover without losing too much business.

What's already happened is that the Note7's portion of Samsung's mobile phone business is gone. Fortunately for Samsung, the Note7 was not the core of the company's business. The phones that are the core of Samsung's phone business, which include the Galaxy S7 and the Galaxy S7 Edge along with several smartphones that are less expensive but still significant, are still being sold. While Samsung's reputation may be hurt, it's not in danger of going out of business.

But that's not to suggest that Samsung is unhurt by the Note7's spectacular demise. The company is being forced to buy back the estimated two million Note7 devices that have been sold worldwide, leaving customers with a choice of another Samsung device or perhaps a device from another maker including Apple and other sellers of Android phones.

Samsung's problems are also hurting the carriers and other sellers of mobile devices that sell Samsung phones. Even if those sellers are reimbursed for the costs of the phones and accessories as Samsung has promised to do, the retail sellers are still out some significant costs in personnel, display space, interest on inventory they can't sell and, to some extent, potential loss of customers that may decide to shop with a different retailer.

And, of course, the ultimate customers are hurt. In addition to those people who were injured by burning or exploding phones, there was property damage to the customers and to third parties. After all, somebody has to pay for taking that Southwest Airlines plane out of service and repairing it, and it's not clear that Samsung is picking up the tab.

Of course, those Samsung customers have also lost time and opportunity. They have to go to their phone seller to return their Note7 devices and the accessories that Samsung has agreed to replace, they had to pay interest on charges in some cases, and the best they can hope for is a $25 gift card.

Wayne Rash

Wayne Rash

Wayne Rash is a freelance writer and editor with a 35 year history covering technology. He’s a frequent speaker on business, technology issues and enterprise computing. He covers Washington and...