Last September Samsung was forced by the Consumer Product Safety Commission, the federal agency charged with overseeing product safety, to recall its new Galaxy Note 7 after a number of units caught fire. That was several weeks after Samsung dawdled with its own voluntary recalls, not once, but twice. The Galaxy Note 7 was Samsung’s flagship product, purportedly rushed to market to compete with Apple’s newly announced iPhone 7 series.
The model was considered so dangerous that the FAA banned them from all commercial airlines and, before boarding every flight, there’s still an announcement to remind us that they are forbidden.
After several months of investigations, Samsung announced Sunday in a Korean press conference the cause. DJ Koh, president of Mobile Communications Business, Samsung Electronics, shared detailed results of the company’s investigation and apologized profusely to Galaxy Note7 customers, mobile operators, retail and distribution partners and business partners.
After their internal investigation, Samsung determined that the fires—Samsung calls them “incidents”—were caused by defectively constructed batteries from two suppliers that resulted in a short circuit in the batteries. The short circuit allowed the positive and negative electrodes to touch. While the defects from each of the two battery manufactures were different, each was sufficient to cause the batteries to heat and burst into flames.
Samsung provided the pictograph below.
Samsung says that they are now adding a more extensive quality-control process to reduce the likelihood of any repetition and they have created a battery advisory group to ensure that the proper attention is paid to battery safety and innovation.
You might think this incident would have severely tarnish Samsung’s brand. But a survey conducted by the market research firm Creative Strategies just after the recall in October indicated the impact on its reputation to be less severe than expected.
The report found that just “28% of Android owners indicated this issue caused them to have a more negative opinion of the Samsung brand.”
The report concludes that “Samsung owners would likely remain loyal to Samsung at large, but the biggest impact is on prospective consumers who may have been considering brands other than Samsung for their next smartphone.” In addition, “An overwhelmingly large percentage of existing Samsung owners still believe Samsung makes the best smartphones on the market.”
In spite of the serious incident and Samsung’s slow response, it appears they avoided seriously tarnishing their brand. But it cost them in another way: Samsung has suffered a $5 billion loss in profits and an estimated $10 billion loss in revenue.