Samsung to revamp quality control process

By Yoon Sung-won

Samsung Electronics said Friday it will restructure its quality control process to boost product safety.

The company is expected to change its corporate culture to focus on safety so it can restore its damaged brand after battery fires in its Galaxy Note 7 smartphones.

Samsung Electronics has ended the Note 7’s production and sales less than two months after its release in August.

“We will concentrate our capabilities on providing safe products by implementing an overall reorganization of internal product quality monitoring processes to boost product safety,” Samsung Electronics said, Friday.

A Samsung Electronics official said, “Though we do not have a detailed plan on how to reorganize the process, we have pledged to continue in the direction we are heading. This is based on our strong will, because the problem has been caused by the quality of our product.”

As the company is expected to review its product development, quality control and component supply channels thoroughly, it is also likely to reshuffle staff and adjust product introduction schedules.

Though the fires were first reported more than a month ago, the root cause has not been clarified. Samsung Electronics’ mobile business president, Koh Dong-jin, said in an email to employees that the company will thoroughly investigate the cause of the problem regardless of the discontinuance of the Note 7.

Samsung Electronics’ latest statement came amid criticisms over its business culture that hurries the introduction of products based on concerns of lead-time advantage in the smartphone market.

The company has sequentially unveiled new premium smartphones ― the Galaxy S series and the Note series ― every half-year. Considering it has always pushed the introduction of new hardware and unprecedented features for new handsets, the timeline must be excessively tight for each department to follow, according to the criticisms.

“Long-accumulated negative consequences of Samsung’s excessive elitism caused the Note 7 fiasco,” an industry insider said. “As it is pushing for improvements in features, quality control and safety checks could have been laid aside.”

Meanwhile, Samsung Electronics also said Friday the estimated additional losses from the Note 7 problems will reach 3.5 trillion won.

“Due to the halt of Note 7 sales, the value of opportunity loss from the fourth quarter this year to the first quarter next year is projected to reach the mid-3 trillion won,” the company said.

It has already reflected 2.6 trillion won of direct losses from the Note 7 production termination in its third-quarter results.

“We have reflected estimated direct expenses of Note 7’s discontinuance of sales in third-quarter earnings. But the negative impact due to the opportunity loss will continue through the fourth quarter and the first quarter next year.”

The company said it expects to suffer a mid-2 trillion won loss in the fourth quarter and an additional 1 trillion won loss in the first quarter next year. Including direct expenses, recall expenses and opportunity losses, the company is estimated to suffer a 7 trillion won loss due to the Note 7 defects.

Earlier on Wednesday, Samsung Electronics adjusted its estimates of operating profit in the third quarter to 5.2 trillion won, down from 7.8 trillion won, after reflecting the 2.6 trillion won of losses from the Note 7 problems. This is the lowest figure since the earnings shock in the third quarter of 2014 when the company posted 4.6 trillion won in operating profit.