U.S. tells consumers to stop using fire-prone Samsung phones

Sat Sep 10, 2016 7:26pm EDT
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By Se Young Lee and Jeffrey Dastin

SEOUL/NEW YORK (Reuters) - A U.S. government safety agency on Friday urged all consumers to stop using Samsung Galaxy Note 7 phones, which are prone to catch fire, and top airlines globally banned their use during flights.

Following reports that the phones' batteries have combusted during charging and normal use, the U.S. Consumer Product Safety Commission said it was working on an official recall of the devices and that users should turn them off in the meantime.

Samsung Electronics Co Ltd (005930.KS: Quote) said it was working with the agency and asked customers to immediately turn in their Note 7 phones. It voluntarily issued a recall last week for 10 markets, including South Korea and the United States, and it said it was expediting shipments of replacement phones to customers in the United States.

The U.S. government action heralds more fallout for the South Korean manufacturer, which may take a financial hit from the recall and lose customers who are concerned about the quality of its flagship phones.

Some analysts say the recall could cost Samsung nearly $5 billion in revenue, after accounting for expenses from the recall process.

For Samsung, which prides itself on manufacturing prowess, the scale of the recall is expected to be unprecedented. Some 2.5 million of the premium devices have been sold worldwide, the company has said. Its shares closed down 3.9 percent on Friday.

Samsung said users in the United States can exchange their phones for one of several models and receive a $25 gift card.

In a separate statement on Saturday, Samsung asked consumers in South Korea to discontinue the use of their Galaxy Note 7 phones and visit one of the company's service centers for the recall process.   Continued...

A model poses for photographs with a Galaxy Note 7 new smartphone during its launching ceremony in Seoul, South Korea, August 11, 2016.  REUTERS/Kim Hong-Ji/File Photo