Narrative: Samsung Bungled the Note7 Recall

Updated: January 23, 2017.

Timeline:

Samsung’s Galaxy Note 7 was very well reviewed when it launched, and some reviewers argued it was the best available smartphone. However, within weeks of the launch, it became clear that the device had a major battery issue which caused fires, and Samsung began recalling what it thought was a subset of devices affected by the flaw. It then became clear that even devices thought safe might suffer from the flaw, and Samsung eventually recalled all Note 7 devices and stopped selling the phone entirely. The recall caused a significant shortfall in revenue and large losses in Q3 2016, with some spillover into Q4.

Many have assumed the Note7 recall would badly damage Samsung’s reputation, but all the surveys I’ve seen suggest the impact is fairly muted. Notably, those surveys suggest existing Samsung device owners’ perceptions of the brand and the quality of its products were relatively unaffected, while it was those with little personal exposure to Samsung products whose opinions were more likely to be affected. In other words, the recall shouldn’t affect repeat sales to existing customers, but might hamper efforts to sell to new customers. Having said that, early reports of Q4 2016 sales overall seem to indicate Samsung had a great quarter.

Samsung has been rightly criticized over the handling of the recall, which played into a broader narrative about its customer service, which has been poor in other circumstances too. It was slow to issue a recall and then didn’t work with the US CPSC at first either. It did come around eventually, however, and seems to have acted much more appropriately since then. However, given that Samsung still hasn’t announced the reason for the fires, concerns over future products are likely to linger until there’s a satisfactory explanation. Certainly, the Note7 recall was a cloud that hung over Samsung’s CES announcements.

On January 23, 2017, Samsung finally released the findings of its detailed investigation into the battery fires. My to-do list for Samsung at this press conference was as follows: demonstrate that the company really had found the root causes of both sets of battery fires, in a way that was credible; where possible have third parties involved; and talk through the changes to manufacturing processes to avoid these issues in future. It and its third party investigators (UL, Exponent, and TUVRheinland) did a good job of talking through all this at its press conference. Samsung certainly went into enough depth and with enough credibility to convince me that it really has uncovered the root and proximate causes of the battery fires in a way that should enable it to avoid the issues in future.

But the press conference also highlighted a couple of other things: firstly, that there were basic and serious flaws in the manufacturing process for Manufacturer B’s batteries (with most reporters saying this is ATL of China); and secondly, that it was partly Samsung’s design for the phone as a whole which put pressure on the batteries from both manufacturers. In other words, the findings lay blame at Samsung’s door in at least two ways: a lack of quality control around third party components, and poor design choices that prioritized thinness over safety. The fact that third party investigators were able to spot the very consistent defects in both sets of batteries, but Samsung wasn’t, also suggests a lack of quality control both before and after the issues emerged. My worry is that, even though Samsung will now undoubtedly change its processes for testing and design, Samsung’s culture was a root cause too, and it’s not at all clear that this will change in the same way or to the same extent.