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Galaxy Note 7 Fiasco: Samsung, South Korean Government Launches Investigation

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Samsung Electronics and the South Korean government have launched their own investigations into what caused the Galaxy Note 7 smartphones to catch fire, industry officials told the country’s Yonhap news agency on Sunday.

More than 100 Note 7 devices caught fire in the United States alone and the fiasco will cost the company over $5 billion from its operating profit over the next two quarters.

Industry analysts say the investigation is crucial for the world’s largest smartphone maker.

“Clearly, the top priority is for Samsung to assess precisely what caused the problems with the Note 7,” says Ian Fogg, head of mobile analysis at IHS Technology. “It’s clear from the ongoing defects with replacement devices that Samsung did not understand the true cause when it issued Note 7 replacement devices as part of the initial recall.”

Samsung previously believed the problem was faulty lithium-ion batteries by one of its suppliers, thought to be Samsung SDI, an affiliate of the smartphone maker. But some replacement devices also burst into flames, so the tech giant killed the Note 7 on Tuesday, ending production and sales of the flagship smartphones just two months after its first release.

On the same day, China’s quality watchdog said Samsung will recall all 190,984 Note 7 devices in the country. China was not included in the 10 markets the Note 7 devices were first recalled. Samsung explained the devices sold there used batteries from its other supplier, Hong Kong-based Amperex Technology, the world’s leading lithium battery supplier. But reports kept coming of Note 7 explosions in China, and both Samsung and Amperex said it was not because of the batteries.

“Understanding what caused the problem is critical both to re-build trust in Samsung as a technology innovator but also to ensure future Samsung devices do not have the same issue as the Note 7,” said Fogg.

Analysts also say that Samsung should reveal the findings from the investigation to the public.

Tracy Tsai, a research vice president at Gartner, said Samsung should “share with the public what went wrong, how they will fix it and what they will do to prevent that from happening again in the future.” Tsai added that Samsung should also “treat this not only a single case but as a lesson: what they've learned from it, how to avoid it, and if just in case any similar crisis happens again, how they can handle it better.”

Ben Stanton, an analyst at Canalys, emphasized that the family-owned conglomerate needs to be transparent with the investigation process.

“Samsung’s credibility depends on how it approaches the investigation process. It needs to be completely transparent in its investigation process, and it also needs to take full responsibility for any wrongdoing,” he said. “This will alleviate some negative sentiment from consumers, but this will be a small part. For most consumers, in the short term, the damage is already done and there is nothing Samsung can do.”

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