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Samsung retrieving all Galaxy Fold samples after defect reports: source

Stock MarketsApr 23, 2019 05:05AM ET
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© Reuters. FILE PHOTO: The Samsung Galaxy Fold phone is shown on a screen at Samsung Electronics’ Unpacked event in San Francisco

By Ju-min Park

SEOUL (Reuters) - Samsung Electronics (KS:005930) is retrieving all Galaxy Fold samples distributed to reviewers, a person with direct knowledge of the matter said on Tuesday, as the firm smarts from the reputational blow of postponing the launch of its first foldable smartphone.

The South Korean tech giant met with embarrassment ahead of the device's U.S. release on April 26, with a handful of technology journalists reporting breaks, bulges and blinking screens after just a day's use.

However, the setback for the $1,980 niche device is trivial compared to the Galaxy Note 7 debacle of 2016, when exploding batteries forced Samsung to scrap the flagship model at huge cost. Galaxy Fold shipments this year are likely to make up less than half a percent of Samsung's annual total, analysts and investors said.

Samsung postponed the Galaxy Fold's launch for an unspecified period of time while it investigated the damage reports, it said on Monday. Initial findings into the causes, it said, pointed to impact on exposed areas of the screen's hinges.

A representative declined to comment further on Tuesday.

Though the issue does not hurt Samsung's balance sheet, the postponement damages the firm's effort to showcase itself as an innovative first mover, not a fast follower, analysts said.

Daiwa Capital Markets said it saw little impact on Samsung's earnings, but that the issue is likely to have a bigger impact on supply-chain companies which rely on the tech giant.

Reflecting that sentiment, Samsung's share ended 0.3 percent lower versus 0.2 percent gain of the broader market. Parts suppliers, however, suffered steeper declines, with hinge maker KH Vatec Co Ltd shedding 3 percent.

A person with direct knowledge of the supply chain said KH Vatec conducted an internal review of hinges used in the Galaxy Fold and found no defects. The supplier declined to comment.

In March, Samsung released a video showing robots folding Galaxy Fold handsets 200,000 times for its durability test.

In some cases, reviewers had peeled off a layer of film which they mistook for a disposable screen protector.

"It's disastrous that Samsung sent samples to reviewers without clear instructions on how to handle the device," said analyst Kim Young-woo at SK Securities.

Samsung planned to sell 1 million Galaxy Fold handsets this year, the equivalent of less than half a percent of the 291.3 million smartphones it sold in 2018. Of last year's the total, 12.8 million were Note series phones, one estimate showed.

"On the bright side, we have an opportunity to nail down this issue and fix it before selling the phones to a massive audience, so they won't have same complaints," said a Samsung employee, speaking on condition of anonymity.

Samsung emailed pre-order customers upon delaying the launch, online outlets said on Twitter.

"Your pre-order guarantees your place in the queue for this innovative technology," Samsung said in the email. "We'll update you with more specific shipping information in two weeks."

Samsung retrieving all Galaxy Fold samples after defect reports: source
 

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