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Samsung pulls plug on exploding Galaxy smartphone

Billions of pounds were wiped off the value of Samsung and analysts predicted a huge hit to future sales after the company finally killed off the phone that kept catching fire.

The South Korean tech giant permanently ceased production of its Galaxy Note 7 smartphones yesterday after weeks of complaints. Samsung shares closed down 8 per cent, wiping about £14 billion off the company’s market value.

Analysts at Credit Suisse said that the scrapping of the handset would translate to lost sales of about 19 million phones, or £14 billion, and others doubted whether the company’s reputation would ever recover. Samsung has been criticised for its slow handling of the crisis and became a laughing stock in some tech circles.

The failure of the phone that was once billed as an “iPhone Killer” could hardly have come at a worse time for Samsung, with both Apple and Google offering new, high-spec alternatives.

Technology analysts suggested that the problem with the phones may have been with the handset design rather than individual lithium batteries, putting the blame squarely on Samsung, rather than its battery suppliers, which were previously in the spotlight. Samsung declined to comment on this point yesterday.

Before the crisis Samsung was the leader in global smartphone sales, with a 22 per cent market share. Analysts said that Apple would step up production of its iPhone to cope with a surge in demand.

Samsung’s lawyers had to face Apple in the US Supreme Court yesterday as part of a long-running patent case that will decide the damages that Samsung must pay for copying elements of its rival’s phone designs. The South Korean company is attempting to reduce a $400 million (£330 million) payment it made to the iPhone maker for infringing its patents.

The judges appeared to come out in favour of Samsung, questioning why Apple should keep the entire award. Samsung is appealing on the basis that the sum is unfair, arguing that its phones contained elements that did not infringe its rival’s patents.

Apple said yesterday that Samsung copied the design of the iPhone several years ago because it was undergoing a “crisis of design”.

Last month Samsung recalled 2.5 million of its latest Galaxy Note 7 handsets over safety fears, with reports of 92 phones overheating, 26 cases of burns and 55 of damage to property.

The company issued replacements, which were supposedly safe, but a number of these caught fire, including one incident on a passenger flight. The company has now advised customers with any Note 7 devices to turn off the power and seek a refund or exchange for a different model.

Samsung issued a brief statement after killing off the phone, saying: “For the benefit of consumers’ safety, we have stopped sales and exchanges of the Galaxy Note 7 and have consequently decided to permanently stop production.”