Samsung And 3rd Party Experts Did What They Needed To Do With Its Note7 Disclosure And Plan

By Patrick Moorhead - January 22, 2017
Samsung Electronics has the number one market share position globally at 20% (Q3 IDC) while Apple has 12.5% global market share and Huawei has 9.3%. Apple’s iPhone has over 60% share of the premium $500+ smartphone space. The Samsung Galaxy Note7 was Samsung’s best challenge to the iPhone’s premium dominance for years and went after their somewhat newer larger screen devices like the iPhone 6 and 6S. Some of the best things about the Galaxy Note7 were its almost borderless HDR display, Qualcomm Snapdragon 820, Iris scanner and secure folder with Knox security, water resistance and an S Pen that worked better than ever, just to name a few. I believe Samsung Electronics did a pretty good job of handling the initial recall until the second set of issues started to arise. Recalls rarely have long-term consumer impact, just look at automobile deaths and how many people must get injured until a vehicle is recalled. To regain the trust of consumers that it had lost, Samsung needed to explain exactly what happened, why it happened and even more importantly, show how they would ensure it will never happen again. Samsung did this tonight in a webcast straight from Seoul, Korea. Huge investment and 3rd party help Samsung Electronics invested enormous resources into this recall effort including the discovery of the core issue and how to resolve and prevent it. Never have I ever seen this many resources dedicated and number of devices tested. Samsung said they used over 700 R&D staff to look at over 300K devices and 30K batteries. This effort was not only done internally by Samsung, they also enlisted the help of household names like UL, TUV Rheinland. Both of those firms are internationally recognized for their testing rigor and their certification logos on consumer products around the world. Samsung also enlisted the help of a third 3rd party organization to validate and confirm Samsung’s own findings, Exponent, who helps with accident and failure investigation as well as product performance and safety recalls. I believe leveraging these third parties was smart as it wasn’t just Samsung talking. What happened These three companies and Samsung looked at things like PCB hardware, software, manufacturing and logistics, discharge tests and they didn’t find anything until they did a battery cell analysis. This was the common root cause that was discovered by UL, Exponent and Samsung. The discovery resulted in realizing that both, yes both battery suppliers had two different defects that produced battery overheating. When it came to batteries supplied by Manufacturer A they discovered some unintended damage in the cell closest to the negative tab. This damage was caused by inadequate volume to accommodate the electrode assembly. This caused multiple ways for internal cell faulting to occur which caused thermal failure with normal battery discharge. Manufacturer B was discovered to have sharp edge protrusions in the welding joints which caused damage to the positive tab in the battery and eventually resulted in a short circuit between the positive tab and the copper of the negative electrode. That discovery was in addition to preventative measures that could have prevented the internal shorts like missing insulation tape and misaligned insulation tape which could have been contributing factors. Net-net there were two different supplier issues and that explains the secondary problem with replacements. I’m stunned at the low probability of issues in the same phone by two battery manufacturers and the fact that against all odds, it happened. The key to understanding this is that smartphone batteries are custom for virtually every phone. New 8 point battery safety check Now that we know what happened from Samsung Electronics and third parties, it’s important to shift forward to what matters most, which is what will Samsung do to reduce the likelihood this happens again. Batteries in the future will just get more challenging as consumers demand even smaller devices with better battery life. To prevent such things from ever happening again to any Samsung phone, the company said it has instituted a series of measures that starts with an 8-point battery safety check. The first step in the 8-point safety check is the durability test, which Samsung has already done in the past but is adding increased frequency to the sampling they had done in the past. The second step is their visual inspection which will now have an increased standard by which Samsung rejects batteries. This process will be done at both the component level and at the production level with component level visual inspections being a sampling and production level being every unit produced. Following that, in the third step they will do an X-Ray test which is done by both the supplier and Samsung at the component level to see inside the sample battery and find any abnormalities. In the fourth step, Samsung added a new charge/discharge test which puts large-scale sampling of approximately 100,000 units under a test that charges and discharges the batteries, this test and the X-Ray test would have been tests that could’ve caught the Note7 faults before they reached consumers. In their fifth step in their 8-point battery safety check, Samsung is implementing a TVOC (total volatile organic compound) test which looks for the leakage of any battery component. This test is a new test that Samsung has added to their battery safety check process and is done during the production process on all Samsung smartphones. For their sixth step in their new battery safety check the company is enhancing their battery disassembly test which is done at the component level to disassemble the battery and assess its overall quality including the battery tab welding and insulation tape conditions. This process is done in samples by both Samsung and their component supplier. In the seventh step, Samsung has added a new accelerated usage test which simulates accelerated consumer usage scenarios with a massive sampling of up to 100,000 units. This test and the enhanced disassembly test are designed like steps three and four to prevent a similar recall in the future. The last step in the 8-step process is the OCV (open circuit voltage) test which tests the battery in an unloaded state and checks for any change in voltage throughout the manufacturing process from component level to complete device. This test is done on all batteries and phones by both the component suppliers and Samsung. In addition to enhancing five of their standard battery tests as part of their battery safety check, Samsung has also added three entirely new tests to act as protection from such a thing ever happening again. These improved measures are paired with Samsung’s implementation of a Battery Advisory Group which includes four Ph.D battery experts including three professors from Cambridge, Stanford and UC Berkeley. This group’s role will be to ensure that Samsung maintains a clear and objective perspective on battery safety and innovation. All of these measures combined not only exhibit Samsung’s extreme commitment to resolving the issue, but also investing in preventing it from ever happening again. Did they do and say enough? It’s important to first put the Samsung Note7 issues into perspective. Consumers are very forgiving as every auto manufacturer has had made decisions that have led to recalls, and yet consumers still buy their cars. Every big consumer electronics brand including Apple, HP, Dell and Sony have all had safety recalls. This also isn’t Samsung’s only safety recall in 2016 either, but consumers continue to buy their electronics. I believe Samsung did what it needed to do to start rebuilding trust with those who actually still care with the Note7 issue. For most Americans and Europeans, it has pretty much blown over as an issue. China may be a different story, however, and Samsung really needs to land this message there. I perceived that Samsung took overall responsibility even though it appears this is a supplier issue. The odds that two different suppliers had issue with the same phone is extremely low likelihood and may signal we may have reached an inflection point in smartphone battery technology. I really like that Samsung brought in household safety names like UL and TUV Rheinland, they did much of the talking, as the rest of the world pretty much drafts off those companies for the most part and they really are the certification standard. The Battery Advisory Group is also a good future move because it helps Samsung address the future and isn’t a bunch of Samsung insiders. In the end, it’s up to Samsung to execute on their plan and to make it real. They cannot have a major incident like this for years, not just in smartphones but in any of their consumer products that carry the Samsung brand. People don’t care what product it is, if it carries the Samsung brand, their products will be connected and considered synonymous. If they do have another recall of this magnitude, then I believe they will have brand issues that will impact sales and consumer confidence. At this point, I am excited to see if Samsung brings out their 8th generation at Mobile World Congress in Barcelona at the end of February.
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Patrick founded the firm based on his real-world world technology experiences with the understanding of what he wasn’t getting from analysts and consultants. Ten years later, Patrick is ranked #1 among technology industry analysts in terms of “power” (ARInsights)  in “press citations” (Apollo Research). Moorhead is a contributor at Forbes and frequently appears on CNBC. He is a broad-based analyst covering a wide variety of topics including the cloud, enterprise SaaS, collaboration, client computing, and semiconductors. He has 30 years of experience including 15 years of executive experience at high tech companies (NCR, AT&T, Compaq, now HP, and AMD) leading strategy, product management, product marketing, and corporate marketing, including three industry board appointments.