Samsung And DeLorean

It couldn’t get much worse for Samsung. Once heralded as the best smartphone ever, the Samsung Galaxy Note 7 has instead proven to be the most combustible smartphone ever. The situation for Samsung is reminiscent of the Irish car manufacturer DeLorean’s short-lived celebrity in the 1980s. The company produced one model of car, which became famous for its starring role in the iconic film “Back to the Future.” Car enthusiasts were elated at the prospect of owing the “next big thing” in automobiles.

Criticized for poor quality, only 9,000 DMC-12 models were ever built. Over the years, several features of the car were changed, such as the hood style, wheels and interior, but production halted in early 1983 when DeLorean experienced persistent problems with car quality and reliability and ultimately filed for bankruptcy.

Let’s first review the fall from grace of the Samsung Galaxy Note 7, as it happened.

August 2, 2016 saw the ambitious launch of the Galaxy Note 7, replete with an iris scanner, a dual-curved display, a water-resistant design and an S Pen. Market analysts reported that pre-orders of the Galaxy S7 range exceeded expectations in China, Europe and India. In Europe, a 250 percent increase in pre-order sales was predicted over the Galaxy S6.

August 3–19, 2016 was a period of ramped up distribution for the Galaxy Note 7. It was available for pre-order in the U.S. and was launched in India. By Aug. 19, the Galaxy Note 7 could be purchased online and offline in the U.S.

August 25, 2016 was when the first hint of problems emerged. The first incident of exploding batteries occurred in China when a device caught fire while charging.

August 29, 2016 brought additional problems when the Galaxy Note 7 was officially launched in China, disappointing consumers who wanted a 6GB model instead of the 4GB model.

September 2, 2016 — By now, 35 Galaxy Note 7s had caught fire. Samsung could no longer bury its head in the sand and announced a recall, blaming the batteries. Samsung met with suppliers to identify possible affected batteries in the market and ceased all sales.

September 5, 2016 saw reports that the largest recall in history was unfolding. Samsung Electronics Australia advised all Galaxy Note 7 smartphone users to stop using the phones immediately and to return them to the provider.

September 7, 2016 was a dark day for Samsung. A phone exploded in the hotel room of an Australian man while he was sleeping, leaving him with burns; one by one, airlines announced a ban on the Galaxy Note 7 on U.S. flights, closely followed by Jetstar, Qantas and Virgin Australia.

September 9, 2016 — On the same day that the U.S. Consumer Product Safety Commission (CPSC) released an official statement warning users about the defective Galaxy Note 7 lithium-ion batteries, Samsung also issued a blog post urging users to power down their Galaxy Note 7 and exchange it. The company expedited replacement devices. Compounding the agony, the U.S. Federal Aviation Administration (FAA) banned the use of Galaxy Note 7s on flights.

September 10, 2016 was most damning for Samsung: a device exploded in a six-year-old boy’s hands in New York.

September 12, 2016 — Samsung was desperately trying to resolve its battery issues, and reports said that replacement phone batteries would be made by China’s ATL. A Samsung subsidiary had previously provided 70 percent of its batteries, and ATL had provided 30 percent for the Galaxy Note 7 devices.

At this juncture, Samsung’s share price fell to its lowest level in nearly two months with its biggest-ever one-day drop. The company’s market cap dropped by $14.3 billion, although analysts predicted that the share price might have bottomed out. Although the company was set to sell its printer business to HP Inc. for $1 billion, that still left $13.3 billion to recoup.

September 13, 2016 — Samsung planned to limit Note 7 charging to 60 percent, but details were scarce on how that change would play out. A South Korean newspaper announced the software update to Note 7 users who might have been inclined to continue to use the smartphone.

September 14, 2016 —The CPSC issued a formal recall of the Galaxy Note 7 phone. Users were informed that they can request a Galaxy Note 7 with a different battery, a refund or a replacement device. Samsung also stated that it expected to have the new Note 7 devices at retail locations in the U.S. by Sept. 22.

The Wall Street Journal reported that Samsung has received 92 reports of overheating batteries in the U.S. These reports include 26 instances of burns and 55 reports of property damage.

The two short but dramatic months of August and September have left Samsung in dire straits without doubt, but a bigger question might be how this playbook will affect Samsung Pay?

According to Samsung, there were 5 million users of Samsung Pay within the first six months of the year, with transactions amounting to $500 million during that same time period. Clearly though, Samsung Pay was counting on big sales of the Galaxy Note 7 to juice those numbers further.

But a Twitter poll by PYMNTS showed that 54 percent of respondents felt that the Galaxy Note 7 recall would have no effect on Samsung Pay, while 25 percent considered it the death knell.

So, Samsung Pay might escape the reaper, but what are the next steps for Samsung?

Damage control — and lots of it.

Perhaps the best approach for Samsung is to focus on the upcoming Galaxy S8, which is due for release in February. That gives the company enough time to communicate with consumers, rebuild its brand image and for the current media hype to dissipate.

For Samsung, if the DeLorean example is anything to go by, there could be life after the death of the Galaxy Note 7. The DeLorean Motor Company plans to revive the DMC-12 and manufacture the car again — 30 years after the vehicle was immortalized in the movie trilogy “Back to the Future.” According to DeLorean, 300 DMC-12 models, at an approximate price of $100,000, could roll off the production line in early 2017.

Hopefully, it doesn’t take Samsung 23 years.