As the adage goes, speed thrills but it also kills. In the case of Samsung, excess speed resulted in exploding phones, a global recall that could cost the company as much as $2 billion (Dh7.35 billion), and a humiliating blow to the brand’s image — one that will take years to recover from. Moreover, to raise cash to pay for the recall, Samsung had to sell its shares in hard disk manufacturer, Seagate, chipmaker Rambus, semiconductor manufacturer ASML, and display-maker Sharp. Bought a Note 7 in the UAE? Here’s what you should do.
In a fascinating behind-the-scenes story, Bloomberg explores how Samsung, obsessed with trumping Apple at the premium end of the smartphone market, rushed the launch of its flagship Galaxy Note 7. It all began with a rumour earlier this year, that Apple’s upcoming iPhone 7 would be more of an evolution in design and tech, rather than a revolutionary new product that invariably sweeps competition away. The senior management at the South Korean tech giant saw an opportunity here — if they could excite the world with a beautiful, feature-packed flagship phone, they could potentially woo millions of customers away from Apple’s “boring” iPhone 7. One big caveat, though — the phone would have to launch in August, weeks before the iPhone 7 launch.
And so began the mad rush. Samsung workers didn’t go home for days and slept in the office, pressurising third-party suppliers, and scrambling to meet the tight deadline. And, yes, they pulled it off and the strategy seemed to have worked – with rave reviews from the tech press, Samsung briskly selling over a million Note 7s in the US alone, and the shipping dates for the pre-orders slipping by a week due to excess demand in countries such as India. The Black Onyx variant had an even longer wait time.
This could have been a success story taught at business schools, were it not for one problem — the phones started exploding around the world. In fact, the story will still make it to B-schools — but as a case study on how not to rush the launch of a key product.
This would be tragic for a company obsessed with quality. Bloomberg recalls a famous story that dates back 20 years. Samsung patriarch and chairman Lee Kun-Hee was said to be so frustrated with the shoddy quality of mobile phones that he gathered thousands of them, piled them up in a heap, and set them on fire — in front of company workers. He followed it up with a plea to the gathered crowd to never compromise on quality. And that dramatic display worked — Samsung went on to become the world’s largest maker of durable and reliable phones. So it is rather ironic that the same company’s phones are “ablaze once again, only this time the flames threaten the company’s hard-won image”.
So with the global recall underway and repaired Note 7s being manufactured — they will sport a green battery icon to distinguish them from their exploding predecessors — is the worst over for the beleaguered Samsung? Well, apparently not. The developing news is that two Note 7 phones caught fire in China. Remember, the explosions were attributed to faulty batteries provided by Samsung SDI, while phone sold in China were supposed to be safe and not recalled — these Note 7s used batteries provided by Amperex, a TDK subsidiary. And Amperex has been tapped as a battery supplier for the replacement Note 7s.
So if the news of phones exploding in China turns out to be accurate, this opens a fresh new can of worms for Samsung. Maybe the problem is not with the batteries, but with the Note 7 itself. This means the company may have to recall the updated phones too!
But we are jumping ahead here. Rest assured, the next few days are going to be rather interesting in the life of a company called Samsung.