Aditya Madanapalle Dec 30, 2016 16:30 PM IST
On August 2, at an Unpacked event the Samsung Galaxy Note 7 was launched. It was a device in a product category of its own, one that Samsung believed in and stuck to, despite initial questions on the need for an S-Pen or such a large screen smartphone. It was a design seemingly behind the times to use a stylus, but Samsung stuck to its vision and the series was a success. The Samsung Galaxy Note 7 had a number of firsts, including Gorilla Glass 5 on the front and back, a water resistant s-pen and HDR video.
Excitement for the device was high as US pre-orders started the very next day. The device launched in India on August 11, for Rs 59,990. We spent a short time with it and were impressed by the device. Back then, it looked like the device would do well.
By August late august, things started going downhill. On August 24, a Samsung Galaxy Note 7 explosion was reported from China. The device had been charging when the explosion occurred. Over 30 Note 7 explosions came to light by the end of August. In early September, Samsung acknowledged the problem and announced that it would recall the smartphones. Sales were halted in China. The worldwide recall was the largest in consumer electronics history.
In early September, Samsung started investigating the issue seriously. It urged users to power down their devices. “To date (as of September 1) there have been 35 cases that have been reported globally and we are currently conducting a thorough inspection with our suppliers to identify possible affected batteries in the market. However, because our customers’ safety is an absolute priority at Samsung, we have stopped sales of the Galaxy Note7.” The US Federal Aviation Administration (FAA) banned the Samsung Galaxy Note 7 from all its flights.
Samsung urged its users to return the device as soon as possible, and announced an over the air update that would limit the charging to sixty percent of the capacity, to reduce incidents of the smartphone catching fire. Samsung shares started to plummet. The US officially recalled the Samsung Galaxy Note 7. The replacement devices were to have a green battery icon to indicate that they were replaced and safe to use. In the United States, it was the largest fire and burn hazard related recall ever.
The replacement devices were to be available by mid September. In South Korea, the replacement devices were postponed to October, to speed up the recall process. Only half of affected users had returned the device. There were reports that a replaced Samsung Galaxy Note 7 exploded in China, one of the models designated as safe. Samsung scrambled to investigate the issue. Samsung announced that the recalls and replacements were successful, and that more than one million people were using safe Samsung Galaxy Note 7 devices.
By the end of September, there were hints of the next Note, and some of the features it could include based on patent filings by Samsung. The previous incident from China of a replaced device exploding was still being investigated, when disaster struck. A replaced Samsung Galaxy Note 7 was turned off, and put in a pocket at the request of flight staff in a US flight. Even as the passenger was pocketing the phone that had been turned off, the Note 7 started emitting smoke, forcing the flight attendants to evacuate the plane.
Samsung staff endured sleepless nights, cancelled vacations, heated meetings and constant social media monitoring to control the damage done by the exploding phones. A customer received a shocking message where Samsung executives were trying to stall a reaction to an exploding replaced phone, which was at odds with Samsung statements prioritising consumer safety. “Just now got this. I can try and slow him down if we think it will matter, or we just let him do what he keeps threatening to do and see if he does it,” the message read. Samsung was in a tough spot. They could attempt to recall the phones and replace them a second time, or sunset the model permanently.
Samsung moved to halt the production of any more Galaxy Note 7 devices over further reports of replacement devices exploding. Five more devices exploded, and a Burger King employee in Korea was caught on film gingerly carrying away a Galaxy Note 7 with greenish smoke pouring out.
After halting production, Samsung stopped the sales of any further devices. It advised all owners to shut down their devices permanently. There were a number of theories and rumours on what really caused the faulty devices to smoke and explode. In any case, Samsung decided to kill the device. Users were shipped fireproof boxes, with instructions on how to package the device and return it to the company. The innermost casing had a ceramic fibre lining.
In India, Samsung did not give its customers a smooth and clear response. Users who had pre-ordered the device just received a note of the paper variety that said the orders would be delayed. Samsung offered a free VR headset as some kind of compensation. Long term Note users however remained loyal to the brand and the series, saw it as a one-off incident that was not a big deal. Samsung investors demanded an explanation over what went wrong with the device, as well as a new device to replace the recalled one.
The Note 7 fiasco actually exposed the dangers and limitations of all lithium-ion batteries in unibody smartphones.
Despite the disaster, Samsung did not cut any jobs. Samsung launched into a thorough investigation, the phones were exploding despite the replacement devices using batteries from a different supplier. Internally, Samsung Electronics Mobile Chief, Koh Dong-jin retained the support of the employees despite the incident. A lack of transparency within the company, and restricted communications between departments, limited the process of investigation into what the actual problem was.
The episode made Samsung miss out in US $ 3 Billion worth of profits over two quarters. The cost estimate does not include the marketing costs to improve the perception of the company after such a crisis. Although the Note 7 was a high end device, the impact of the disaster would be felt across the entire range of devices, according to analysts. Samsung started offering Galasy S7 Edge and Galaxy S7 smartphones to customers who had pre-booked a device, as a peace offering.
In mid October, the US banned Samsung Galaxy Note 7 devices from air transport, even when turned off. Canada, Israel and Japan followed suit, also banning the model from air travel. Airlines banned the device on their own flights as well, without a government order. Singapore Airlines, Air Berlin, Lufthansa, Cathay Pacific, Dragon Air, Quantas and Malaysia Airlines all took steps to ban the device on their flights. Vistara in India banned the device. As a response to these air travel bans, Samsung set up a counter in Seoul airport to replace Samsung Galaxy Note 7 devices on the spot.
Samsung started manufacturing 10-nanometre semiconductors, the first company in the world to do so. The SoCs manufactured with this process would apparently be used in the Samsung Galaxy Note 8. Suppliers faced cancelled orders because of the abrupt discontinuation of the Samsung Galaxy Note 7. Samsung offered to compensate these component suppliers with orders for other phones to cushion the blow. Samsung is apparently in talks with LG Chem to source batteries for their new models.
The Galaxy Note 7 recall was ill timed particularly because of the iPhone 7 launch. An estimated five to seven million people are expected to opt for one of the new iPhone models as the Note 7 is not available. Samsung faces a potential class action lawsuit by US consumers. 527 users from South Korea went ahead and sued Samsung, seeking compensation for the cost of exchanging the device, the psychological harm of using a dangerous phone, and the time wasted in transferring data to and from the phone.
Samsung responded by offering upgrades to the Note 8 and the Galaxy S8 for Note 7 customers in South Korea. The Samsung Galaxy S8 may be available as soon as February 2017, as specifications of the device leaked online.
To get to the root of the problem, Samsung started investigating all aspects of the phone, not just the batteries. The hardware, the software, and the manufacturing process are all being closely investigated. A Samsung Galaxy S7 edge exploded while charging in the US, but so far this has been an isolated incident for the S7 model.
Samsung just reported its third quarter financial results. The chip and display business of the company remained healthy despite the crisis of the smartphone department. The net profit has dropped by 16.8 percent because of the Note 7 crisis. Operating profit dropped 29.7 percent from last year. Samsung slashed its revenue forecast for the next quarters as well.
On 19 December, Samsung completed its own investigation into the explosion, and sent its report to regulators. The results of the report are expected to be released to the general public soon. The devices sold fairly successfully, and Samsung still has more Galaxy Note 7 units in use than LG V20 and OnePlus 3T combined. Samsung announced that it will be pushing out an update that will make the Note 7 impossible to use. The phone feature will be disabled, and the battery will no longer charge. Verizon has decided to defer the update till the fifth of January, so as not to affect the consumers during the holiday season.
The company is making moves to regain the confidence of its customers. The company believes the release of the Samsung Galaxy Note 8 will be an important part of the recovery process.