Bloomberg News

Samsung Criticized by China State-Run TV for Smartphone Crashes

October 23, 2013

Samsung Criticized by China State-Run Media for Handset Crashes

An employee walks in front of a Samsung Electronics Co. shop in Beijing, China. Photographer: Tomohiro Ohsumi/Bloomberg

Samsung Electronics Co. (005930) drew criticism from China’s national broadcaster for handsets that allegedly malfunction because of faulty memory chips, becoming the latest foreign company scrutinized by state-run media.

The Galaxy S and Note series handsets are crashing as many as 30 times a day and the chips need to be upgraded, according to China Central Television’s “Economic Half-Hour” program, which cited a mobile-phone repairman it didn’t identify. Samsung, the largest seller of smartphones in the country, said it’s committed to the highest quality.

Samsung joins Apple Inc. (AAPL:US), Danone, Volkswagen AG and Starbucks Corp. (SBUX:US) in being criticized by state-run media for their operations in China, the second-largest economy. Samsung, the world’s largest producer of handsets, sells at almost 5,000 locations in China and had 18 percent of the market in the June quarter, according to researcher Canalys.

“It seems like China is bashing some big foreign brands in turns,” said Lee Do Hoon, an analyst at CIMB Group Holdings Bhd in Seoul. “The reason behind all this may be because the Chinese government wants to protect the local companies.”

Samsung has identified the source of the problem as software and said customers can download a firmware patch or visit an authorized repair outlet for free service, CCTV reported.

Shares of Samsung fell 0.9 percent to close at 1,442,000 won in Seoul trading today, while the benchmark Kospi index, fell 1 percent. Lenovo Group Ltd., the largest Chinese smartphone vendor, fell 0.5 percent at HK$8.22 in Hong Kong.

China Sales

“We remain committed to providing the highest quality products and services,” Chenny Kim, a spokeswoman for Suwon, South Korea-based Samsung, told Bloomberg News today. “Upon verification of these reports, including their technical aspects, we will respond accordingly.”

China accounted for 14 percent of Samsung’s consolidated sales last year, compared with 29 percent for the Americas and 25 percent for Europe, according to data compiled by Bloomberg.

Samsung’s leading share of China’s smartphone market in the second quarter outpaced the largest local handset makers in the next five spots: Lenovo; China Wireless Technologies Ltd.’s Coolpad; ZTE Corp.; Huawei Technologies Co.; and Xiaomi Corp., according to Canalys.

Apple Chief Executive Officer Tim Cook apologized to Chinese consumers earlier this year after two weeks of being lambasted by state-run media for arrogance and poor customer service.

Yum! Brands Inc. (YUM:US) and McDonald’s Corp. (MCD:US) last year pledged to ensure the safety of food after CCTV reported they may have sold chicken that had been indiscriminately fed antibiotics and growth hormones.

Danone’s Dumex baby nutrition unit this month said it will take disciplinary measures and strengthen governance in China after a government body and state media accused it of paying doctors to drum up infant-formula sales. Earlier this year the company was fined in a separate price-fixing probe and recalled some products on contamination concern.

To contact Bloomberg News staff for this story: Jungah Lee in Seoul at jlee1361@bloomberg.net; Edmond Lococo in Beijing at elococo@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net


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