Samsung to customers: ‘Don’t use Galaxy Note7’

A sign at a check-in counter at Incheon International Airport urges travelers not to use Samsung Electronics’ Galaxy Note7 on planes on Monday. The Ministry of Land, Infrastructure and Transport advised Note7 users to turn off the phone and not charge it on board. [NEWSIS]

Samsung Electronics issued a statement Saturday to urge Galaxy Note7 customers in Korea to “stop using” the device.

The company dubbed the move “a preliminary measure for the sake of the safety of domestic consumers.”

“We would like to recommend that domestic users of Note7 follow the global standard so as to minimize inconvenience when traveling abroad,” said Samsung in its Saturday statement.

The U.S. Federal Aviation Administration warned travelers to avoid turning on or charging the model last Thursday on board airplanes and four Australian airline operators prohibited passengers from doing so.

As of Monday, the Note7, whose shipments began on Aug. 19, was banned from use on planes in some 10 countries, including Canada, Singapore and the United Arab Emirates.

Immediately after Samsung’s announcement Saturday, the Ministry of Land, Infrastructure and Transport advised Note7 users “to turn off the phone and not charge it on board [aircraft], and not to stow the phone in any checked baggage.

“Many countries are encouraging suspension of Note7 usage,” said the ministry. “We considered the safety concerns of passengers on board.”

Samsung’s warning statement came after the model continued having battery problems that caused units to melt down, going as far as allegedly burning down a house in the United States.

After consumers from Korea, China and the United States began posting photos of melted or burned Note7s on social network on Aug. 23, the number of reported cases started piling up. Samsung pledged on Sept. 2 to suspend sales of the well-reviewed model and to replace sold Note7s - up to 2.5 million units, including preorders - with new ones or to provide refunds. The action was perceived by many media outlets and experts as “timely and swift damage control.”

Three mobile carriers in Korea on Monday began lending Galaxy A and Galaxy J smartphones to Note7 owners who are afraid to use the device until Sept. 19, the scheduled recall date.

Samsung attributed the problems to a defective battery produced by its affiliate Samsung SDI, one of two battery suppliers. The other is Amperex Technology Limited, a Chinese producer.

The recall is going to put a dent in third- and fourth-quarter earnings for the tech giant.

Brokerage houses earlier this month estimated the cost of the recall at 700 billion won ($627 million) to 1.2 trillion won.

Samsung Securities Monday issued a report saying operating profit for July-December could be reduced by as much as 1 trillion won.

Credit ratings agency Moody’s estimates the cost of the Note7 recall at up to 1.5 trillion won.

“The situation now seems to have become even more complicated and serious than at the early stage,” said Hwang Min-sung, an analyst with the Samsung Securities firm. “That will [negatively] affect consumer sentiment, which means a risk of a bigger loss compared to the point of the recall announcement.”

But no brokerage houses have yet to lower their target prices, which are as high as 1.8 million won, for shares of Samsung, the biggest market cap on Seoul’s main bourse.

“Even experts cannot foresee when the situation will be patched up completely,” said Lee Seung-woo, an analyst with IBK Investment & Securities. “Investors may remain hesitant for a while due to lingering uncertainties.”

Samsung is scrambling to regain trust of customers by stressing the dedication to quality control by its own employees.

In the past several days, the Suwon-based conglomerate offered quality-control training sessions to not only the division responsible for smartphones but all divisions.

In 1995, Samsung took the extreme measure of smashing and burning some 150,000 units of defective Anycall mobile phones in front of some 2,000 employees at it factory in Gumi, Gyeonggi.

The destruction was ordered by Chairman Lee Kun-hee after the proportion of defective Anycalls surged to 11.8 percent. The Note7’s defect rate is estimated at 0.0024 percent, according to Samsung.

BY SEO JI-EUN [seo.jieun@joongang.co.kr]