Managing Tech Recalls: The Samsung Note 7

A GALAXY of Troubles

As of writing this piece, Samsung is set to lose $5.3 billion dollars due to the recent Note 7 recall. Putting that in perspective, they’ve lost the equivalent of the entire nominal GDP of Guyana and Djibouti combined. More importantly, over 25 people were injured their products, and consumer faith in the brand is lower than ever. Stock price has fallen $21.8% since the first week of October, and the price has fluctuated drastically with developments in the recall case, as evident in the diagram below.

This all comes together to form a 30% cut in Q3 profits.

At release, the Note 7 was universally acclaimed and lauded by various publications as the sexiest, most beautiful, phone of your dreams. Within a matter of days, the positivity turned into a PR nightmare, and Samsung’s market supremacy began to show cracks. How could the largest handset manufacturer in the world make such an oversight? Similarly, why was the subsequent recall and replacement of the products unsuccessful? Is there an underlying quality control pattern from the tech recalls of the last few years, or simple coincidence? This article examines the recent history of tech recalls using the Note 7 scenario as a case study.

Background

With constant coverage, and conflicting reports, the details of the recall may seem murky. Released on August 19th, the Samsung Galaxy Note 7 was the latest spin-off of Samsung’s flagship Galaxy S smartphone line. Initial impressions were positive, praising a sleek design, HDR screen, and biometric features. In South Korea, the pre-orders for the Note 7 were 266% higher than the cumulative first three-day sales of the preceding Note 5 model.

However, the sales ground to a halt as reports of Note 7 battery explosions began rolling in a week later. In response, Samsung ended sales, issued a recall of the product starting September 21st, and updated the firmware to reduce instances of overcharging. The recalled devices were to be refunded or replaced, but the new models suffered from the same battery fire issues. The recall was concluded with Samsung ending the manufacture of the Note 7 line in early October, offering refunds to those with outstanding pieces.

What Went Wrong?

The battery fires were spurred by a short circuit, caused by a defect in the membrane separating the positive and negative charges in the battery. Samsung was unable to recreate the battery explosion within their labs, and thus switched the battery supplier from subsidiary Samsung SDI. In an attempt to make smaller, longer lasting batteries, it seems Samsung’s designs forced the negative and positive ends too close together, breaking the membrane and causing the short circuits.

This Isn’t the First Time

A misconception arisen from the Note 7 scenario is that recalls are a rarity in the tech industry; not at all the case. With over 2.5 million affected units, the Samsung recall seems impossibly large, however just two years ago, Hewlett-Packard recalled 5.5 million power cables that posed potential fire hazards. In fact, there’ve been twelve major tech recalls in the past 2 years from firms like Google, Lenovo and Toshiba. Of this group, 10 of the recalls related to battery or charging issues leading to a fire hazard.

Peak Battery Development

The cause for this upswing in battery recalls can be found in their main component. Lithium is widely used in batteries as it is the lightest weighing metal, but it is also very dangerous. Chemically, lithium is very reactive, and as batteries become more compact and faster charging, the risk increases. Unstable energetic compounds close to air create the perfect storm for a sudden, very hot, fire.

In the 25 years since the launch of the first mass market Lithium Ion battery, technology has advanced significantly, but the peak is near. Researchers believe that only about 30% extra by weight efficiency that can be added to batteries until the limit is hit. It is easy to imagine the possible future recalls that may result in trying to push to this point.

Recall Management

It’s definitely possible for companies to effectively manage recalls to rebuild customer relationships. One example of this would be the recall of the FitBit Force. In 2014, under 2% of wearable devices were causing users to break out in rashes. In response, the company removed the product from sale very quickly. The CEO posted a letter in regards to the defective devices on the company website, and the expedited reply generated a good deal of public and media goodwill.

Tesla also faced issues when0 garage car chargers posed electrical hazards. With similar speed, they company issued a software update to diagnose charging issues. Tesla also sent updated plugs with added fuses, to display the desire for extra safety. Even though the software fix was enough to repair the charging issues, Tesla went the extra mile in introducing the replacement parts for added peace of mind.

Lessons Learned

There are a few important takeaways from the Note 7 case. Samsung is not the first, and will not be the last, firm to issue a large scale technology recall. Ensuring that quality control is done objectively, not in a rush to mass market, is key. Samsung used their own internal laboratory to test the original and replacement batteries, as opposed to an objective third party. Competitors such as Motorolla are already moving towards out of house laboratory tests, and Samsung should adopt suit.

Secondly, customer management was poor. Videos of burned phones began circulating on August 29th, however Samsung did not issue its recall until September 21st. Additionally, an essential element to a recall is apologizing to the consumers. While the company president has issued an apology during a Korean press conference, the recall webpage doesn’t include an apology.

Finally, it is important to understand that technological improvement strategies have their limits. As examined, battery advancements are slowing and down and becoming more difficult. The focus should shift from making bigger batteries, to more energy efficient devices. The safety of the consumer is paramount over any product upgrades.