Samsung vows to figure out root causes of Note 7 problem
By Yoon Sung-won
Samsung Electronics pledged Thursday to discover the reason behind Galaxy Note 7s catching fire to restore customer confidence in its products.
Mobile business President Koh Dong-jin promised in an email to employees to “thoroughly investigate the fundamental causes so that all customers will be able to trust Samsung’s products and enjoy using them,” company officials said.
Koh’s comment comes after Samsung Electronics decided to halt production, sale and replacement of Note 7s after 59 days since its Aug. 19 release.
He also vowed to figure out the cause of reported fires in Note 7 replacements and take the best action for customers.
Koh tried to console and encourage employees.
“We have quickly and courageously faced the biggest risk in our business division ever during the last few weeks,” he said. “I feel deeply sorry and grateful to our employees for their consistent support and trust. We will regain confidence and trust in our products by eliciting the causes even though it takes time.”
When the problems first surfaced last month ― forcing Samsung to announce a recall ― the company pointed to the battery cell as the main cause. But after multiple reports about similar burning incidents happening in the replacement Note 7s, the company retracted this and said the cause could be much more complex.
According to industry sources, Samsung Electronics is holding an investigation at its headquarters in Suwon, Gyeonggi Province, by collecting burned Note 7s.
Though Koh underlined restoration of customer confidence as the key reason why the company is expediting the investigation into the causes of the fires, the company also needs to urgently find a resolution to prepare for its next flagship smartphone, expected to be the Galaxy S8.
Currently, Samsung Electronics is boosting production of the S7 series to temporarily fill the absence of the Note 7. But rumors abound that the company may unveil the S8 at the Consumer Electronics Show 2017 in January and roll it out in February, which is earlier than the company’s usual launching timeline.
Samsung Electronics declined to confirm anything about the S8’s early release.
Analysts here warned that the company should not rush to launch the S8 until it can guarantee consumers that similar problems will not occur.
“Launching the S8 earlier than planned is the last thing that Samsung Electronics should consider,” HMC Securities analyst Noh Geun-chang said. “Making sure that such an incident will never happen again through thorough product quality checking is the most important thing now.” He added that the S8’s launch may be postponed amid negative images of the Note 7 lingering in consumers’ minds.
Samsung Electronics and mobile carriers SK Telecom, KT and LG Uplus started to give refunds on Note 7s or replace them with other smartphones, Thursday. The companies said they will provide a mobile shopping mall coupon worth 30,000 won ($26.7) and an additional 70,000 won as telecom subsidy for those who exchange a Note 7 for other Samsung Electronics handsets including the Galaxy S7, S7 edge and Note 5. Those who chose to replace their Note 7 with a non-Samsung handset can still get the coupon, they said. In the United States, Samsung Electronics is offering a gift card worth $25 for those who replace a Note 7 with the S7 or the S7 edge.
The refund and replacement will be available until the end of this year, but is not likely to continue afterwards, according to telecom industry sources.
Elliott’s support?
U.S. hedge fund management firm Elliott Management, which owns 0.62 percent share of Samsung Electronics, revealed its trust in the Korean smartphone giant even after it ditched the Note 7.
In a statement Wednesday by its subsidiaries Blake Capital and Potter Capital, the company said, “The recent issues surrounding the Note 7, while unfortunate, do not diminish our view that Samsung Electronics is a leading global technology company with a world-class brand.”
It added, “We believe that the company’s forthcoming new leadership can build on the company’s initial response to this situation by adopting best-in-class operational and corporate governance improvements.”
Elliott’s comment came a week after its letter urging a drastic business reorganization including dividing Samsung Electronics into separately listed holding and operating companies.
“Now is the time for real shareholder value, corporate governance and transparency improvements, which we believe will help Samsung Electronics achieve equity market valuation that properly reflects its first-class portfolio of businesses,” Elliott said in its Oct. 5 letter.