Samsung Delays Note7 Shipments After Users Report Exploding Batteries

During the IFA show, Samsung had to issue a recall for its Galaxy Note 7 smartphone as well as a stop to sales (although it seems that in some geographies, sales continued to be made). 35 cases of phones ‘blowing up’ while charging were logged by Samsung around the world and the fault was estimated to be occurring in around 24 phones per million sold. 2.5 million units are affected by the recall although it was not clear whether the batteries from all suppliers (the company is reported to use batteries from its SDI subsidiary and also from a TDK subsidiary, Amperex). The WSJ reports Nomura as saying that 65% of production comes from SDI and 35% from Amperex.

Samsung Burnt Note 7 – Image:KoreaBizWire

An exchange programme has been set up although details seemed to have varied from country to country. As Samsung uses different processors and other components, it is understood to want to replace the units only in the geographies where they were bought, to avoid consumers trying to get an exchange in another region in order to get a different specification.

The Note 7 was released in China on Sept 1st and this was because batteries were from a ‘different supplier’, believed to be Amperex.

Analyst Comment

This was a bad week for Samsung. We noted that, at IFA, it was dipping the phones in water to demonstrate their waterproofing, which was leading some to joke that the water was for cooling! Samsung was pulling back shipments to replace the batteries. I wonder how many were stuck in containers in Hanjin ships? If they were (and this may not be the case as smartphones are very high value for the volume/weight, so may have been shipped by air) it could take a time to sort them all out. (BR)