Report: Samsung Halts Production of Galaxy Note 7

Samsung Electronics Co Ltd has suspended production of its Galaxy Note 7 smartphones following reports of fires in replacement devices, South Korean media said on Monday, a further setback for the tech giant trying to manage its worst ever phone recall crisis.

Samsung's decision to temporarily halt Note 7 production was done in cooperation with authorities in China and the United States, as two U.S. carriers have stopped exchanging or selling new Note 7 phones, Yonhap News Agency cited an unnamed source at a Samsung partner firm as saying.

Samsung did not immediately comment on the Yonhap report.

Problems with replacements for the Note 7 model would create a new and potentially costly chapter to a global scandal which has hurt the reputation of the world's biggest smartphone maker. It also could add new dangers for consumers.

AT&T Inc, the No.2 U.S. wireless carrier, said on Sunday it will stop exchanging new Note 7 smartphones due to reports of fires from replacement devices that Samsung has said used safe batteries.

No.3 wireless carrier T-Mobile US Inc said it was temporarily halting sales of new Note 7s as well as exchanges while Samsung investigated "multiple reports of issues" with its flagship device.

T-Mobile offered customers who brought in their Note 7s a $25 credit on their phone bill.

Samsung announced on Sept. 2 a global recall of 2.5 million Note 7s in 10 markets including the United States due to faulty batteries causing some of the phones to catch fire.

A Southwest Airline flight was evacuated earlier this week after a replacement model Note 7 smartphone began smoking inside the plane, according to the family who owns the phone.

Samsung earlier said it was investigating reports of "heat damage issues" and would share its findings when the investigation is complete.

"If we determine a product safety issue exists, Samsung will take immediate steps approved by the CPSC (U.S. Consumer Product Safety Commission) to resolve the situation," Samsung told Reuters in a statement.

Samsung shares were down 3.3 percent as of 0125 GMT, compared with a 0.1 percent fall for the broader market.

"I thought the Note 7 matter was coming to an end, but it’s becoming an issue again," Alpha Asset Management fund manager CJ Heo said.

Samsung should be able to recover from the short-term reputational damage of the recalls, but fourth-quarter sales of the Note 7 would be hurt, he added.

South Korea's largest mobile carrier, SK Telecom, said it was closely monitoring the situation and would not comment further. KT Corp, the No.2 South Korean carrier, said it had taken no steps in regards to sales or exchange of new Note 7s.

(Story refiles to fix typo in intro.)

(Additional reporting by Parikshit Mishra in Bengaluru and Nataly Pak in Seoul. Writing by Lincoln Feast; Editing by Miyoung Kim; and Stephen Coates)