Investors wiped more than $10 billion off Samsung Electronics Co.’s market value Friday after air-safety regulators singled out the company’s Galaxy Note 7 smartphone as a potential fire hazard, prompting airlines to issue warnings to passengers.
In Seoul, shares of the South Korean tech titan closed at 1.575 million won ($1,432), down 3.9%. The stock had been holding up relatively well despite safety concerns about the Galaxy Note 7, the latest addition to the company’s phone lineup.
Samsung last week recalled 2.5 million of the waterproof, iris-scanning smartphones in 10 countries following reports of fires caused by faulty batteries. The U.S. Federal Aviation Administration on Thursday warned passengers not to use or charge their Galaxy Note 7s on planes and not to stow them in checked bags—a warning matched by Europe’s air-safety regulator on Friday.
In China, Samsung launched the Galaxy Note 7 on Sept. 1 despite the fire reports, saying batteries in phones sold there come from a different supplier. Batteries for Galaxy Note 7 phones sold in China are from Hong Kong-based Amperex Technology Ltd., a unit of Japan’s TDK Corp., one of two suppliers; the other is Samsung SDI Co.
At an intersection in Beijing’s ritzy Sanlitun shopping district, a Samsung pavilion offers passersby a chance to test the Note 7 and its virtual-reality headset. Asked whether the Note 7 has battery issues in China, one attendant said she wasn’t sure, while another said the Chinese battery supply is fine.
Samsung’s broader challenge in China’s smartphone market, the world’s largest, is competing with the country’s many budget brands. Once the leader there, Samsung ranked sixth in China in the second quarter with an 8% market share, according to research firm Canalys.
The Note 7 troubles are “a big blow for Samsung when it’s trying to recover its position in China,” said Nicole Peng, an analyst at research firm Canalys.
Pavilion visitor Cheng Wei, 36, said he hadn’t heard about the Note 7 batteries, but characterized Samsung’s phones as being not as good a value as their Chinese counterparts.
“I don’t care too much about phone brands,” said Mr. Cheng, currently a Meizu 3 user. “But if the features are all the same, of course I would still prefer a domestic brand.”