With Samsung accounting for around 17 percent of South Korea's gross domestic product, such a major business reversal is likely to have a national impact, Bank of Korea Governor Lee Ju-Yeol said.
Unable to replicate the problem, and with reports of flaming devices mounting up, Samsung initially concluded the problem was with some of the phones' batteries, blaming a "minor manufacturing flaw" at its affiliate Samsung SDI. It is also said that Samsung will be opting for ground shipping, thus reducing the risk of the phone exploding mid-flight.
The top-of-the-line Note 7 was crucial to Samsung's growth plans this year, with the company struggling to boost sales, squeezed by Apple in the high-end sector and Chinese rivals in the low-end.
Users may replace their recalled phones with other models of Samsung's smartphones or get a full refund, China's General Administration of Quality Supervision, Inspection and Quarantine said on its website. South Korea's KOSPI Index dropped by 1.21 percent.
Domestic demand for high-end Chinese smartphones could get a big boost after Samsung Electronics Co made a decision to recall all 190,984 Galaxy Note 7 phones that it has sold on the Chinese mainland, analysts said.
A customer tries out a Samsung Electronics' Galaxy Note 7 at the company's headquarters in Seoul, South Korea, October 10, 2016.
"It's a very critical moment for Samsung", said Martin Roll, the author of "Asian Brand Strategy". Even now - more than a month after the first reports of issues with Note 7 devices surfaced and with the phone out of production - the New York Times says the company doesn't know why its phones are spontaneously combusting, despite deploying hundreds of employees to work on the problem.
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The technology giant had delayed the launch of the Note7 in the United Kingdom in September as it investigated and replaced faulty units that were overheating and exploding due to a battery defect.
September 19 - Samsung starts Note 7 exchange programme in SouthKorea.
And SK Securities analyst Kim Young Woo told the same news agency that the company might chose to accelerate the launch of the S8 to make up for abandoning the Note 7.
The world's top-selling smartphone company is now awaiting the results of probes by USA and Korean safety regulators. The asset manager owns shares in Samsung.
August 31 - Samsung delays shipments of Note 7s to South Korean carriers.
September 16 - Florida man sues Samsung for burns from Note 7 explosion.
"I think it's possible for fourth-quarter profits to come in as much as the high 7 trillion won range".