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Investors wiped more than $10 billion off Samsung Electronics Co.'s market value Friday after U.S. air-safety regulators took the unusual step of singling out its Galaxy Note 7 smartphone as a potential airborne fire hazard.

The shares closed at 1.575 million won ($1,432), down 3.9%.

Airlines including Qantas Airways Ltd. and Virgin Australia Holdings Ltd. warned passengers not to use or charge their Galaxy Note 7s on planes, while more reports of fires surfaced in the U.S.

Samsung, which last week recalled 2.5 million of the waterproof, iris-scanning smartphones following reports of fires caused by faulty batteries, said Friday it plans to expedite new shipments in response to the U.S. Federal Aviation Administration's decision to ban the use of the device on planes.

Samsung is also offering $25 gift cards to U.S. Galaxy Note 7 owners who exchange their phones, and free virtual-reality headsets and a voucher for about $50 of content to Indian consumers who preordered the Note 7.

In South Korea, some carrier shops said no customers had canceled Galaxy Note 7 orders despite its being the subject of one of the largest recalls in smartphone history.

"There is no resistance to the Galaxy Note 7," said a staff member at an SK Telecom Co. shop in Seoul. "Customers have called in to ask about exchanging their devices, but we haven't had a single cancellation yet."

Still, Kim Dan-bee, a 26-year-old high-school teacher in Icheon, a city south of Seoul, said she's now leaning toward Apple Inc.'s iPhone 7, unveiled this week.

"Personally, getting a Galaxy Note 7 would be an easier transition for me," said Ms. Kim, who's considering a replacement for her two-year-old Galaxy Note. "But I'm a bit worried it might explode."

In China, Samsung launched the Galaxy Note 7 on Sept. 1 despite the fire reports, saying batteries in phones sold there come from a nonfaulty 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.

In a flashy 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 had 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 that Samsung's phones aren't 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."

Samsung has used its popular Galaxy phones to boost its mobile business, which has been struggling for more than two years amid strong competition from Apple and Chinese rivals.

Lilian Lin in Beijing and Juro Osawa in Hong Kong contributed to this article.

Write to Eun-Young Jeong at eun-young.jeong@wsj.com and Eva Douat eva.dou@wsj.com

(END) Dow Jones Newswires

September 09, 2016 09:55 ET (13:55 GMT)

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