Total Recall

Samsung’s Note7 Problems Will Soon Be Forgotten

Samsung’s global voluntary recall of its Galaxy Note7 device last week is unprecedented in the smartphone business. Never before has a leading brand such as Samsung had to recall all shipments of its latest flagship device. By some accounts, Samsung has shipped more than 2 million Note7 units during the past few weeks, an impressive figure for the latest device from the premium Galaxy 7 family.

The problem was originally reported in Asia and Samsung has acknowledged 35 cases to date. A small number of Note7 units have a faulty battery cell that can cause it to combust when being charged.

According to Samsung’s US information page on the matter, customers with a Note7 device have a choice of exchanging their Note7 for a new one starting next week or they can make an immediate exchange against a Galaxy S7 or Galaxy S7 edge. In the US, Note7 owners will also receive a $25 gift card or the same amount off of their wireless operator bill. In the UK, Samsung announced a one-to-one exchange plan that will start in the coming weeks.

The Galaxy Note7 is one of the highest-priced phones ever released with unsubsidized pricing starting at $850. With a 5.7-inch super AMOLED display, 64GB of on-board storage, a microSD slot, IP68 certification, a 3,500 mAh battery and an S Pen stylus, the Note7 has found its place in the market for high-end Android phones.

Samsung can be commended for moving quickly to recognize and address the problem. This will be a costly recall but Samsung’s goodwill is worth protecting. According to consultancy Interbrand, Samsung’s brand is the seventh most valuable in the world, worth about $45 billion. (Apple takes the number-one spot with a brand value of $170 billion).

Samsung’s recall highlights the complexities of the modern component supply chain. A product such as the Note7 could have hundreds of suppliers, often several for the same part. Components are sourced from all parts of the world, and in Samsung’s case, sometimes from sister companies in the same concern.

We believe that it’s unlikely that Samsung will lose much in the long run as a result of this recall. The company might recover some of the cost of this process from the culpable supplier, but it’s likely to take some sort of financial hit. Samsung’s more-valuable asset is intangible: consumer loyalty. Note7 customers represent a certain type of mobile user and they are unlikely to move to a different type of Android device or a different platform. This recall will soon be forgotten.