Note 7 fires were caused by the battery

FILE PHOTO - An exchanged Samsung Electronics' Galaxy Note 7 is seen at the company's headquarters in Seoul

FILE PHOTO - An exchanged Samsung Electronics' Galaxy Note 7 is seen at the company's headquarters in Seoul

Published Jan 23, 2017

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Seoul - It was the battery, after all.

In a presentation and news conference on Monday that

lasted more than two hours, Samsung Electronics detailed the results of its

investigation into Note 7 smartphones that overheated and burst into flames

last year. There were few surprises. While the company cited flaws in battery

manufacturing and design for the fiasco, it took full legal responsibility and

vowed never to let it happen again.

The crisis was a public relations fiasco for South

Korea’s biggest company. Reports of people injured by exploding Note 7 phones

raced around the web, and nervous airlines banned the gadget -- and sometimes

all Samsung devices -- from their planes. The total cost of the recall was

estimated to be more than $6 billion.

Most consumers have moved on, and Samsung is now engulfed

in another crisis involving bribery, presidential influence-peddling and the

heir of the conglomerate. Monday’s presentation is its final push to assure the

public and investors that it acted responsibly, and put a lid on the episode.

“It was the battery - not the device itself, design of

the phone or software - so the lingering doubt over Samsung’s other smartphones

will be largely removed,” said Greg Roh, an analyst at HMC Investment

Securities.

The battery in the initial batch of Note 7 phones was

manufactured by an affiliate, Samsung SDI Co. Replacements made after a recall,

which came from Amperex Technology, a unit of TDK, were also faulty amid a

quick ramp-up in production. After stumbling a second time, Samsung decided to

end production and scrap the phone altogether.

Electrodes at a specific location within the first

batteries came in touch with each other, causing a short circuit that in turn

caused overheating and fires, D.J. Koh, head of Samsung’s mobile business, said

at the news conference. The defects happened both during the design and

manufacturing phase, he said.

Read also:  Note 7: Samsung faces class-action suit

For the second batch of batteries, a defect in another

part of the unit triggered similar results. Samsung’s own investigation was

backed up by UL, Exponent and TÜV Rheinland Group, outside organisations

hired to determine the cause of the faulty units. In total about 200 000 phones

and 30 000 separate batteries were examined in an investigation that included

700 people.

“We provided the target for the battery specifications

for the innovative Note 7, and we are taking responsibility for our failure to

ultimately identify and verify the issues arising out of battery design and

manufacturing,” Koh said. “We have taken several corrective actions to make

sure this never happens again.”

With Samsung taking full legal responsibility for the

recall, it isn’t likely that Samsung SDI and TDK will bear the total cost of

the recall. Samsung SDI said in a statement that it has invested about 150

billion won ($129 million) in safety and that its batteries will probably be

used in Samsung Electronics’ next smartphone model. A representative for

Tokyo-based TDK didn’t immediately have a comment on the results of the

investigation.

Investors have also mostly moved on. Samsung shares,

which have been trading near record highs, were little changed on Monday

following the presentation. The company will report earnings on Tuesday, which

are projected to confirm a preliminary report showing that its business remains

sound.

Samsung says it’s now focused on learning from its

mistakes as it prepares to launch the next in its Galaxy S line. Koh said

Samsung isn’t planning to unveil the S8 at the Mobile World Congress in Barcelona

at the end of February, suggesting that the company is going to take its time

to make sure the product isn’t prone to any defect or problems.

“Consumers will not tolerate even the tiniest problems in

the S8, so that’s even the bigger challenge for Samsung now,” HMC’s Roh said.

“The first month of the release will be important. If no problems detected

during that one month, sales of the S8 could even surge.”

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