Reports suggest that Samsung is facing a $1 billion hit following its recall of the Galaxy Note 7 smartphone, with the finger of blame pointing to components manufactured by its own battery unit.
Samsung put a stop to sales of its latest flagship last week, after confirming a “battery cell issue” amid reports of device fires while recharging. It also said it would replace existing devices.
The Wall Street Journal and The Korea Herald both reported that the batteries involved were manufactured by Samsung SDI. Batteries made by another supplier, Amperex Technology, which were used in devices for China and Hong Kong, were not impacted by the same issue.
According to WSJ, 65 per cent of Galaxy Note 7 batteries were Samsung parts, with the remainder from Amperex. The Korea Herald suggested that Samsung SDI batteries will be dropped for the Galaxy Note 7, and that a third vendor may be added to the supplier roster in the not too distant future.
Reuters suggested that in its “rush to bring new products to market”, Samsung has accelerated its product development cycles, “raising concern” that it fell short on quality testing. This would also have increased the demands it placed on suppliers.
While the halting of sales and recall is likely to impact Samsung in the short term – including a loss of momentum ahead of the introduction of Apple’s new iPhone later this week – financial analysts do not see this impacting the South Korean company in the longer term.
Devices manufactured in September will now be destined to replace earlier devices rather than going to new customers, creating a supply/demand imbalance.
And its prompt action on the recall is also likely to limit the impact on its brand.