Samsung Stops Smartphone Shipments as Safety Suspicions Spread

SEOUL—Samsung Electronics Co.'s mobile revival was thrown into doubt as the technology titan halted shipments of its latest smartphone in South Korea.

Investors wiped more than $4 billion off Samsung's market capitalization Thursday, following the company's confirmation late Wednesday of a delay in shipping the larger-screen, waterproof Galaxy Note 7—launched less than two weeks ago—for additional testing.

Samsung spokesman Ki-yung Nam said he couldn't say whether the delay applied outside South Korea, and didn't elaborate on the reason for it. National news agency Yonhap had earlier reported five claims globally of Galaxy Note 7 smartphones exploding or catching fire while being charged. Some social media sites carried photos and videos of scorched phones, though they couldn't be verified. Samsung declined to comment.

South Korean carriers including KT Corp. and SK Telecom Co. confirmed that expected shipments had been delayed.

On Thursday, the Korean Agency for Technology and Standards, a government consumer-safety watchdog, requested more information from Samsung on the reported incidents. An agency official said Samsung hasn't yet responded.

The world's biggest smartphone maker by shipments has been relying on its new Galaxy phones to drive the recovery of its mobile business, which has been struggling for more than two years amid strong competition from Apple Inc. and Chinese rivals.

The large-screen Galaxy Note 7— which has won positive reviews—went on sale in South Korea on Aug. 19, ahead of the planned unveiling next week of Apple's next-generation smartphones.

Strong sales of the smaller flagship Galaxy S7 phones had helped make the three months ended June Samsung's most profitable quarter in nearly two years. At 16%, the company's mobile profit margin was the highest since 2014.

Samsung shares ended Thursday at 1.587 million South Korean won ($1,422), down 2% for the day and off 3.2% from the record high hit last month.

Other Samsung Group shares also fell. Samsung SDI, a major supplier of batteries for Samsung smartphones, was off more than 6% to 108,500 won. The company said it is working with Samsung Electronics to investigate the issue.

"There's no clear identified cause for the accidents yet," said S.R. Kwon, an analyst at Dongbu Securities. "Even if there is a problem with the smartphone batteries, we don't know if the battery was supplied by Samsung SDI."

Samsung says Galaxy Note 7 batteries are provided by multiple suppliers, which it declined to name.

Samsung isn't the first smartphone maker to run into battery-safety issues. Apple earlier this year recalled adapters sold in Europe and other regions, citing a dozen cases in which they had delivered electric shocks.

In 2013, China state media reported that the death of one 23-year-old woman was caused by electrocution when she answered a call on her iPhone as it was connected to a non-Apple charger. Apple launched a charger trade-in program.

Low-quality electronics, including power chargers, are still common in China, with reports each year of fires or explosions. Chinese airlines require smartphones be turned off for domestic flights, and allow external battery packs aboard only if they meet certain criteria.

Amazon.com pulled many Chinese hoverboards off its website this year after reports of explosions.

Eva Dou in Beijing contributed to this article.

Write to Eun-Young Jeong at eun-young.jeong@wsj.com

(END) Dow Jones Newswires

September 01, 2016 07:25 ET (11:25 GMT)

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