SINGAPORE — In an unprecedented move, electronics giant Samsung sounded the death knell on its embattled Galaxy Note7 smartphone, announcing on Tuesday (Oct 11) evening that it will permanently stop its global production — confirming rumours that had circulated all day and sent its stock price plunging.

The plug was pulled after months of reports worldwide of the phones overheating and its batteries catching fire, issues that plagued even the replacement devices that were issued after a global recall of 2.5 million Note7 units.

Amid fresh warnings from regulators, phone carriers and airlines, Samsung had on Tuesday morning had urged owners to switch the phone off over safety concerns.

It also asked all global carriers to stop sales of Note7s and stop exchanging original devices for replacements, while it worked with regulators to look into the problem.

But hours later — after the Korean market closed — a spokesperson for the firm said it had decided to put consumer safety “as top priority”, and “reached a final decision to halt production of Galaxy Note7s”.

By then, the firm’s shares had closed 8 per cent lower, its biggest decline since 2008, wiping around US$18 billion (S$24.8 billion) off the value of the company, according to Thomson Reuters data.

The phone, Samsung’s priciest model to date, was launched in August and pitched as a rival to Apple’s iPhone. But within days of the launch, images of charred Note7s began circulating on social media, and reports of the phone “exploding” and emitting smoke emerged.

A formal recall was launched on Sept 15. In Singapore, some tens of thousands of customers had ex-changed their faulty Note7 sets for replacement phones.

But the problems persisted, prompting authorities in the US and South Korea to investigate why even the replacement phones reportedly caught fire, while airlines began telling passengers not to use the Note7 on flights. The United States Consumer Product Safety Commission also told consumers to stop using the device over fire concerns.

Analysts on Tuesday said Samsung’s handling of the crisis has battered consumer confidence and its brand.

“How they handled it left a lot to be desired, a decision like this could have been announced much earlier. By dragging this out for such a long time, it’s caused a lot of damage to their brand,” said Mr Leon Perera, chief executive officer of Spire Research and Consulting.

Agreeing, Mr Clement Teo, principal analyst at research firm Ovum, said it had been a “disastrous campaign”. “Samsung should have put a stop to the production, and do a global recall after the problems appeared,” he said.

The episode is set to burn a sizeable hole in Samsung’s pocket, based on the number of phones already sold, the cost of production and in stopping it, said Mr Teo.

Before the recall, research firm Strategy Analytics had estimated that Samsung would sell 15 million Note7 units in 2016. But now, the firm is estimating that Samsung, with about US$180 billion in annual revenue, could lose more than US$10 billion from the ongoing troubles.

Said Mr Perera: “It raises questions about Samsung’s ability to manage the life cycle of products, and in crisis management. In the short term, the market share may shift to other brands like Apple.”

Whether the company survives the bruising to its brand will depend on how it manages the fallout in the coming months. Ms Tracy Tsai, research vice president at Gartner (Personal Technologies), said: “The company still has a strong brand, and most importantly, it is about how they tackle crises going forward.”

Mr Perera suggested that to restore confidence, Samsung could put in place stronger guarantees for new products, and a “more aggressive” trade-in programme for competitor models in future. It could also improve its communication with customers in the short term, “to take responsibility and explain how they will prevent this in the future”, he added. WITH AGENCIES