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The Fatal Mistake That Doomed Samsung’s Galaxy Note
On the verge of challenging Apple’s mobile phone dominance, the South Korean company made a rushed decision, based on incomplete evidence, that later forced it to kill the model.
Attendees gather around display tables to view the Samsung Galaxy Note 7 smartphone during a launch event in August in New York City. PHOTO: DREW ANGERER/GETTY IMAGES
By JONATHAN CHENG in Seoul and JOHN D. MCKINNON in Washington
Oct. 23, 2016 2:56 p.m. ET
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The X-ray and CT scans showed a pronounced bulge.
After reports of Galaxy Note 7 smartphones catching fire spread in early September, Samsung Electronics Co. executives debated how to respond. Some were skeptical the incidents amounted to much, according to people familiar with the meetings, but others thought the company needed to act decisively.
A laboratory report said scans of some faulty devices showed a protrusion in Note 7 batteries supplied by Samsung SDI Co., a company affiliate, while phones with batteries from another supplier didn’t.
It wasn’t a definitive answer, and there was no explanation for the bulges. But with consumers complaining and telecom operators demanding answers, newly appointed mobile chief D.J. Koh felt the company knew enough to recall 2.5 million phones. His suggestion was backed by Samsung’s third-generation heir apparent, Lee Jae-yong, who has advocated for more openness at one of the world’s most opaque conglomerates.
That decision in early September—to push a sweeping recall based on what turned out to be incomplete evidence—is now coming back to haunt the company.
Two weeks after Samsung began handing out millions of new phones, with batteries from the other supplier, the company was forced to all but acknowledge that its initial diagnosis was incorrect, following a spate of new incidents, some involving supposedly safe replacement devices. With regulators raising fresh questions, Messrs. Lee and Koh decided to take the drastic step of killing the phone outright.
Samsung discontinued production of Galaxy Note 7 smartphones after incidents of the phones catching fire. PHOTO: ASSOCIATED PRESS
The Galaxy Note series helped make Samsung a smartphone leader, and the Note 7, its most advanced phone ever, had all the makings of a hit. For a moment, it looked like the Galaxy Note could win over users of Apple Inc.’s iPhone and cement Samsung as one of the world’s most dominant technology companies.
Instead, as a result of the flammable phones and the botched recall Samsung’s leaders are now struggling to salvage the company’s credibility. At risk is the expected February launch of its next flagship smartphone, likely to be called the Galaxy S8.
The U.S. Consumer Product Safety Commission, which oversees product recalls in Samsung’s biggest smartphone market, is expected to investigate whether Samsung notified the agency soon enough of dangers posed by the device. Samsung’s decision to launch its own recall, bypassing the CPSC’s formal process for a time, may have prevented regulators from figuring out more about the root cause, some U.S. lawmakers suspect.
Samsung still doesn’t have a conclusive answer for what’s causing some Note 7s to catch fire.
A Samsung spokeswoman said the company worked quickly with regulators and took immediate action when problems arose with the phone. “We recognized that we did not correctly identify the issue the first time and remain committed to finding the root cause,” she said. “Our top priority remains the safety of our customers and retrieving 100% of the Galaxy Note 7 devices in the market.”
Outside experts have pointed to a range of possible culprits, from the software that manages how the battery interacts with other smartphone components to the design of the entire circuit.
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