Earlier this month Samsung had indicated that the cause of the Note 7 explosions and other mis-events was the batteries. On Sunday, Samsung has made its full findings known, and we now know what the actual battery problems were.
The root cause seems to be how the batteries themselves were put together. In the case of batteries that were supplied by Samsung SDI, there was reportedly not enough space between the insides of the battery and its protective pouch. This caused undue pressure on the top right corner of the battery. In worst case scenarios, it was causing the electrodes to crimp and come into contact, causing short circuits and thermal runaway.
As for batteries supplied by the other provider, Amperex Technology Limited, some cells in the battery pack were actually missing insulation tape. In others, there were protrusions inside the cells that damaged the anode-cathode separators. The separators themselves were thinner than required, which increased the risk of them being damaged and a short circuit occurring.
These were the findings of 700 engineers that conducted tests on 200,000 devices and 30,000 batteries. The investigation was also reviewed by independent third-party consultants such as TÜV Rheinland.
At the press conference held on Sunday, Samsung said that it had overhauled the safety testing processes for batteries as a result of the findings. However, it did not comment on the quality and safety procedures in place prior to the launch of Galaxy Note 7.
Samsung’s head of mobile communications, D.J. Koh, simply ended the press conference with these words:
“We are taking responsibility for our failure to identify the issues arising out of the battery design and manufacturing process prior to the launch of the Note 7.”
Samsung managed to dig itself out of the hole in 2016, actually showing growth during the last quarter on the strength of its display supply business and other growing units. For the fourth quarter (October-December 2016), Samsung expects consolidated operating profit to come in at $7.8 billion, a 50% growth from the same period last year.
If that’s accurate, then Samsung is looking at its best profit figure in three years. Not bad for a company that had to absorb an estimated $5.2 billion in losses over the Note 7 incident.
The bigger problem now is future sales of its phones. The offset in revenues and profitability primarily came from its components divisions, but what of its position in the smartphone market?
As of March 2016, Samsung’s position in the U.S. market was at the Number 1 spot with 28.8% against Apple’s 23%. Though the most recent figures aren’t out, it’s not a stretch to assume that Apple might once again have captured the top spot against Samsung.
But 2017 is expected to be very different, with three Chinese smartphone makers planning to enter the world’s most lucrative market. Huawei, Xiaomi and Oppo will be launching several of their own smartphone models in the United States, and it’s not because they want to. It’s more of a question of survival for them.
At last count, Apple was responsible for more than 90% of the smartphone industry’s profitability. That means very few others are actually in the black. Margins on smartphones in developing markets are generally very slim due to the competition, and the U.S. is one of the few markets that can turn that around.
That’s why major Chinese players are entering the U.S. market, so they can finally start making a profit on their smartphone and mobile device units.
As such, the pricing competition will now heat up in the United States, and Samsung is going to the be the first target. Of course, iPhone sales may also take a hit, but it’s the core Android market that’s getting additional competition rather than exclusively premium phone makers like Apple.
In addition, mid-range smartphones from Google’s Android One program are also expected to make their way into the United States very soon, although that might not happen in 2017.
Still, it signifies a major shift in the Android smartphone landscape in the U.S., and it’s definitely something to watch for over the course of the year.
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