The Supply Chain Implications of Samsung’s Note7

October 27, 2016

Samsung lithium battery

As I traveled through the airport last weekend I couldn’t help but notice something out of the ordinary. Signs everywhere disclaimed, “No Samsung Note7’s allowed.” At first, I did not think much of it. Of course, at this point, I was already well aware of the issues Samsung was facing in regards to its exploding phones. But as I took my seat and prepared for departure, the Captain came on the intercom and once again reminded passengers that, "Samsung Note7’s were strictly prohibited." It was at that point when I couldn’t help but ponder just how significant this issue truly is. My curiosity got the best of me, and immediately I began my research (so much for sleeping on the plane).

Samsung has been all over the news lately because of their Note7 mobile phones that are overheating and catching fire. Once again, lithium ion batteries are under safety scrutiny. In recent years we have seen multiple recalls of mobile phone batteries, as well as laptop computer batteries, calling into question whether or not lithium ion batteries are stable enough to handle the constant “on-status” we expect from our technology.

But at this time, we don’t have a conclusive answer as to whether or not the batteries are the cause of the fires. This is troubling not only for those in the supply chain whom are responsible for sourcing the same batteries that the Note7 uses for their products, but also for those who use lithium ion batteries in consumer products across multiple industries.

Samsung’s SDI Battery Assumptions

Samsung first recalled the Galaxy Note7 phones that had been using the Samsung SDI batteries, and replaced the phones with new ones that contained batteries from a different supplier. Replacing the batteries that they had been sourcing from themselves was a setback, but since they needed an immediate solution to their problem, and fast, they decided it must be the batteries that were at fault. Chances are it seemed to them a likely scenario considering lithium ion batteries had caused problems in the past. They made this decision, however, without conclusive proof that it was the batteries. As we know, replacing one lithium ion battery with another didn’t solve the problem and more Note7 explosions happened.

Other consumer electronic companies were watching and waiting, especially since Samsung SDI batteries are part of a much larger supply chain, including Apple’s iPhones. What’s interesting here is that those involved with sourcing the Samsung SDI batteries did not immediately initiate a recall of their batteries that were already released to the public.

Did they believe the issue with the Galaxy Note7 was more complex than simply replacing one lithium ion battery with another? It makes sense that if other consumer grade products using the Samsung SDI batteries were not experiencing the same, dangerous outcomes as the Note7 phones, the problem might not be that particular battery.

According to the New York Times, “Scotching the Note7 does not end the questions facing Samsung. It still has not disclosed what specifically caused the Note7s to smoke and catch fire – or even whether it knows what the problem was. And the company may face questions about the safety of its other products, such as kitchen appliances and washing machines.”

Not knowing, or not operating in the spirit of full transparency, could be damaging to not only Samsung, but also to the other companies that source their components, including the SDI batteries. By immediately placing blame on the SDI batteries they have cast a shadow of doubt over other consumer products that use those same batteries. And while I don’t plan on trading my iPhone in anytime soon, I am more aware of when it feels really hot or when my battery usage is acting unusual. It’s probably nothing, but should we be more cognizant of these things that seemed trivial annoyances before?

Lithium ION Batteries Tarnished Reputation

Samsung being so quick to place the blame on the lithium ION batteries has once again brought questions of lithium ION battery safety to light, and this could have an impact that resonates through supply chain. We are forced to ask – is it the batteries themselves that are unsafe or is it the lack of testing in the rush to market that makes the batteries in the products unsafe?

The United States Consumer Product Safety Commission states, “The lithium-ion battery in the Galaxy Note7 smartphones can overheat and catch fire, posing a serious burn hazard to consumers.”

What is important to differentiate here is that although the lithium-ion battery is overheating and catching fire, it might not be the source of the issue. It may actually be the effect of a problem within the design and development of the Note7 smartphone. What we know now is that we aren’t positive why this is happening, but that we shouldn’t be so quick to immediately see lithium-ions as the problem without having a complete understanding of the catalyst.

These batteries are used far and wide across the supply chain, and although I’m not advocating for them one way or another, I think it is wise for consumers to focus on facts and not fears. It was the Note7 phones that were banned from airplanes as opposed to all phones that use lithium-ion batteries. That being said, IATA has current information that should be referenced when shipping lithium batteries in order to remain compliant, since they do fall under the HAZMAT umbrella. This is for manufacturers and others involved in large shipments and not the average consumer traveling abroad.

Samsung’s Future

Overall, Samsung has been struggling with the fallout from this unfortunate public relations nightmare and working through it day-by-day. The financial effects from the combustible Galaxy Note7 phones have been harmful to the company and the New York Times goes on to report that:

“The Galaxy Note7 debacle virtually wiped out profits at its high-profile mobile communications division during the third quarter, Samsung said. The division posted an operating profit of $87.9 million. By contrast, a year ago the division posted a profit of about $2.1 billion."

As I’ve mentioned before, companies, like Apple, that have sourced the Samsung SDI batteries will likely invest time and resources monitoring the situation. Perhaps they will also invest part of their R&D budget into testing existing phones consumers are using that contain those Samsung SDI batteries. While Apple is not the only company utilizing these lithium ion batteries in their consumer electronics, they are a leader in the smartphone field and a recall could be equally, if not more, devastating to their brand and their profits.

With the constant demand from consumers for better, faster, and now, companies that produce heavily used consumer electronics must ensure that everything is safe beyond the shadow of a doubt. Our cell phones are often extensions of ourselves with the amount of time we can spend glued to them, and they are a constant companion when traveling anywhere. Knowing that they are safe, that they have been tested by multiple outside firms and proven as such, will go a long way to restoring consumer confidence.

Going forward, cooperation across the supply chain has the potential to repair the damage caused to the Samsung brand, and also to bring to light the need for transparency from start to finish with consumer electronics. What is most important now is what can be taken away from this unfortunate occurrence and what will be done next as Samsung, Apple and others move into the future.  

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