Samsung says batteries
caused Note 7 fires, may delay new phone launch
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[January 23, 2017]
By Hyunjoo Jin and Se Young Lee
(Reuters) - Samsung Electronics Co Ltd indicated on Monday that its
latest flagship Galaxy S smartphone could be delayed as it pledged to
enhance product safety following an investigation into the cause of
fires in its premium Note 7 devices.
Wrapping up its months-long probe, the world's top smartphone maker said
faulty batteries from two suppliers were to blame for a product failure
that wiped $5.3 billion off its operating profit.
Samsung mobile chief Koh Dong-jin said procedures had been put in place
to avoid a repeat of the fires as the South Korean firm prepares to
launch the Galaxy S8, its first premium handset since the Note 7's
"The lessons of this incident are deeply reflected in our culture and
process," Koh told reporters at a press briefing. "Samsung Electronics
will be working hard to regain consumer trust."
Koh said the Galaxy S8 would not be unveiled at the Mobile World
Congress trade show in Barcelona beginning Feb. 27, the traditional
forum for Galaxy S series launches. He did not comment on when the
company planned to launch the handset, though analysts expect it to
start selling by April.
Investors have said Samsung needs to reassure consumers that it is on
top of the Note 7 problem and can be trusted to fix it.
Samsung's reputation took a hammering after it announced a recall of
fire-prone Note 7s, only for reports to emerge that replacement devices
also caught fire. Images of melted Samsung devices spread on social
media and airlines banned travellers from carrying them on flights.
The handset, Samsung's answer to Apple Inc's iPhones, was withdrawn from
sale in October less than two months after its launch, in one of the
biggest failures in tech history.
Samsung said later on Monday it has not decided whether to reuse parts
in the recovered Note 7s or resell any recalled phones. A person
familiar with the matter told Reuters reselling some Note 7s as
refurbished phones was an option.
The firm said it has recovered 96 percent of the 3.06 million Note 7s
sold to consumers.
Investigations by internal and independent experts ruled out problems
with the Note 7's hardware and software. Instead, they said the
batteries, which came from two suppliers, featured different
manufacturing defects or design flaws that caused them to short-circuit.
"The odds that two different suppliers had issue with the same phone is
an extremely low likelihood and may signal we have reached an inflection
point in smartphone battery technology," said Patrick Moorhead,
president of technology analyst and advisory firm Moor Insights &
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A flag bearing the logo of Samsung Electronics is pictured at its
headquarters in Seoul, South Korea, November 29, 2016. REUTERS/Kim
Samsung did not name the suppliers on Monday but previously identified them as
affiliate Samsung SDI Co Ltd and China's Amperex Technology Ltd (ATL). SDI said
separately it would invest 150 billion won ($129 million) to improve product
safety and expected to continue supplying batteries for Samsung phones. ATL
declined to comment.
Samsung said it accepted responsibility and would not take legal action against
suppliers. The company touted longer battery life and fast charging as major
improvements when it launched the Note 7.
"The current situation is not largely different from that of the first recall,
when Samsung pointed the finger at battery defects," said Park Chul-wan, a
former director of the Centre for Advanced Batteries at the Korea Electronics
Among other measures to boost safety, Samsung said it had implemented an
eight-point battery check system to avoid any such problems going unnoticed
Samsung's mobile division is widely expected to have bounced back from the Note
7 failure during the fourth quarter, experts remained cautious about the outlook
for sales of future flagship devices.
"Consumers will accept the results (of the probe) only if there are no problems
with the S8," said Park.
Moorhead, however, said he thought Samsung had done enough to convince consumers
that it can prevent future issues.
Samsung Electronics shares ended up 2.3 percent in a flat wider market. Analysts
said the rise was mainly due to a healthy outlook for makers of tech components
such as memory chips but also boosted by hopes the firm will be able to put the
Note 7 fiasco behind it.
The firm expects fourth-quarter operating profit to hit a more than three-year
high when it reports earnings on Tuesday, driven by booming chip sales.
($1 = 1,166.8000 won)
(Reporting by Hyunjoo Jin and Se Young Lee; Additional reporting by Dahee Kim in
SEOUL and Sijia Jiang in HONG KONG; Editing by Stephen Coates)
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