Samsung halts sale, exchange of Note 7 on safety fears

The South Korean conglomerate also called a halt to worldwide sales and exchanges of the troubled handset, as the federal US consumer regulator issued an alarming warning of the possible dangers the device posed to its owners, their families and homes.

The news slammed Samsung's share price, which plunged as much as seven percent in afternoon trade.

Today's announcement came a little over a month after the world's largest smartphone maker announced a recall of 2.5 million Note 7s in 10 markets following complaints that its lithium-ion battery exploded while charging.

The unprecedented move has turned into a PR disaster for the company, which prides itself on innovation and quality, and the situation only worsened when reports emerged a week ago of replacement phones also catching fire.

"If it's once, it could be taken as a mistake but for Samsung, the same thing happened twice with the same model so there's going to be a considerable loss of consumer faith," said Greg Roh at HMC Investment Securities.

"The reason consumers prefer brands like Samsung and Apple is because of product reliability ... so in this case brand damage is inevitable and it will be costly for Samsung to turn that around again," Roh said.

Samsung's statement on Tuesday was the first formal acknowledgement of continued safety concerns with the replacement Note 7s and came a day after it acknowledged it was easing production of the flagship smartphone.

"Because consumers' safety remains our top priority, Samsung will ask all carrier and retail partners globally to stop sales and exchanges of the Galaxy Note 7 while an investigation is taking place," the statement said.

A number of major distributors - US telecom firm AT&T and German rival T-Mobile - had unilaterally suspended sales and exchanges of the model on Sunday.

Samsung also advised all customers with an original or replacement Galaxy Note 7 to 'power down and stop using the device' immediately - a warning echoed by the head of the US Consumer Product Safety Commission, Elliot Kaye.

"No one should have to be concerned their phone will endanger them, their family or their property," Kaye said in a press release.

Samsung's decision to halt sales and exchanges was 'the right move' Kaye said, adding that his commission was actively investigating reports of phones overheating and burning in multiple US states.