* Samsung says adjusting Note 7 shipments after fires
* U.S. Australia carriers halt sales or exchanges of new
* Samsung recalled 2.5 mln Note 7s due to faulty battery
* Samsung shares fall in Asian trade
(Adds analyst on rise in Apple share price and news of U.S.
By Se Young Lee
SEOUL, Oct 10 Samsung Electronics Co Ltd
has suspended production of its flagship Galaxy Note
7 smartphones, a source said on Monday, after reports of fires
in replacement devices added to the tech giant's worst ever
Top U.S. and Australian carriers also suspended sales or
exchanges of Note 7s, while major airlines reiterated bans on
passengers using the phones, after smoke from a replacement
device forced the evacuation of a passenger plane in the United
States last week.
Fires in phones that were meant to replace devices that had
been recalled because of their propensity to explode would be a
disaster for the world's largest smartphone maker, suggesting it
had failed to fix a problem that has already hurt its brand and
threatens to derail a recovery in its mobile business.
"If the Note 7 is allowed to continue it could lead to the
single greatest act of brand self-destruction in the history of
modern technology," said Eric Schiffer, brand strategy expert
and chairman of Reputation Management Consultants.
"Samsung needs to take a giant write-down and cast the Note
7 to the engineering hall of shame next to the Ford Pinto."
In a regulatory filing, Samsung said it was "adjusting"
shipments of Note 7s to allow for inspections and stronger
quality control due to some devices catching fire.
It did not comment on the production halt or the cause of
the fires, while the source - who declined to be identified
because they were not authorised to speak to the media - did not
explain whether specific problems had been identified or when
production was halted.
A Samsung official told Reuters earlier on Monday it was
investigating reports of "heat damage issues" and would take
immediate action to fix any problems in line with measures
approved by the U.S. Consumer Product Safety Commission.
On Sept. 2, Samsung announced a global recall of 2.5 million
Note 7s due to faulty batteries which caused some of the phones
to catch fire.
It ordered new batteries from another supplier and started
shipping replacements to customers just two weeks later. But
similar problems arose with a replacement Note 7 on Oct. 5,
which began smoking inside a Southwest Airline flight in the
Samsung shares, which have rebounded after an initial
sell-off on the recall, closed down 1.5 percent, compared with a
0.2 percent rise for the broader market.
"I think the cleanest thing to do is to give up on the Note
7," said HDC Asset Management fund manager Park Jung-hoon, whose
fund owns Samsung shares.
"What's scary is that this is causing people to repeatedly
doubt Samsung's fundamental capabilities, so it's important for
Samsung to get past this issue quickly."
Meanwhile, Apple Inc's stock on Monday jumped 2.3
percent, reaching a high not seen since December.
"We believe the Note 7's ongoing issues could help market
share shifts for Apple," Credit Suisse analyst Kulbinder Garcha
said in a note to clients on Monday.
Samsung's recall crisis has coincided with pressure from one
of the world's most aggressive hedge funds, Elliott Management,
to split the company and pay out $27 billion in a special
Major airlines, air regulators and airport authorities
reiterated bans on passengers using the phones, saying Note 7s
should not be powered up or charged on board.
A South Korean government agency said it was monitoring
reports of the fires and warned that the recalled Note 7 devices
should not be used or charged inside airplanes.
At least three U.S. owners of Galaxy phones that caught fire
have sued Samsung in the last month, according to a review of
dockets on Westlaw. Litigation could remain limited, given that
the Samsung phones were on the market for only a few weeks
before the company recalled them, and no deaths have been
attributed to their use.
Verizon Communications Inc, the No.1 U.S. wireless
carrier, said on Monday it would suspend the exchange of
replacement Note 7s, and would allow customers to exchange the
replacement for another smartphone.
AT&T Inc, the No.2 U.S. wireless carrier, said earlier
that it would stop issuing replacement Note 7s and would let
customers with a recalled Note 7 exchange that device for
another Samsung smartphone or other smartphone of their choice.
No.3 wireless carrier T-Mobile US Inc also 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.
Australia's largest carrier, Telstra Corp, said
Samsung had paused supply of new Note 7s, while fellow
Australian carriers Optus and Vodafone said they had stopped
issuing new Note 7s.
South Korea's two largest mobile carriers, SK Telecom
and KT Corp, said they were monitoring
(Additional reporting by Parikshit Mishra in Bengaluru, Nataly
Pak in Seoul, Dan Levine and Noel Randewich; Writing by Lincoln
Feast; Editing by Miyoung Kim, Stephen Coates, Ted Kerr and