So the Phone You Bought Might Explode? What to Do With a Note 7

Some six weeks after the first reports of exploding phones surfaced, Samsung engineers, as well as U.S. and South Korean government investigators, have yet to discover why lithium batteries in the company’s new smartphone product overheat and in some cases explode.

The Korean Agency for Technology and Standards (KATS) said in an e-mailed statement Tuesday, it is investigating the possibility the Note 7 smartphones may have a new defect. An official at the Ministry of Trade, Industry and Energy didn’t rule out the possibility that the problem may be tied to the overall product design or production. Samsung has said it’s working with investigators and still trying to identify the source of the battery problem.
Whether the Samsung brand takes a lasting hit will depend, in part, on how long the mystery of the Note 7 batteries continues and whether the company is perceived by consumers as stonewalling.
"Samsung must come clean with a thorough explanation as the previous explanations don’t completely add up now," said Mark Newman, an analyst with Sanford C. Bernstein in Hong Kong.
The company needs to find out the exact cause and communicate it clearly to consumers, according to Yoo Jong Woo, an analyst at Korean Investment & Securities Co. "I think the company will be able to recover from the blow to its image over time, if the problem does not spread to other phones," he said.
Brand strategist Roll agreed that consumers will be forgiving if this is viewed as an aberration at an otherwise reliable company. "Consumers need to be kept in the loop here because they’ve put trust in Samsung’s brand," Roll said. "It’s a partnership."
Until Samsung can come up with some answers, it faces thorny challenges. Six analysts surveyed by Bloomberg had originally estimates that Samsung would ship 13 million Note 7s this year. Now it has a hole in its product lineup, just as Apple begins selling its iPhone 7 and high-end devices from Google hit the market.
There’s also the risk that the Note 7 troubles spill over to other smartphones in the Galaxy lineup, dampening overall sales momentum against key rivals such as Apple and Huawei Technologies Co. Samsung faces a serious image problem in China, where customers and government-owned media have railed about Samsung’s handling of its recall.
"They’re done in China," said Shaun Rein, managing director of Shanghai-based China Market Research Group. "For the Chinese, they don’t differentiate between the Note 7 and all Samsung phones. So they’re not willing to buy any Samsung phones right now."
Back in South Korea, some consumers are more forgiving. Several customers shopping at a smartphone retail store in Seoul’s Jonggak neighborhood shrugged off suggestions the latest crisis could hurt Samsung’s image. They said they would still consider Samsung phone as an option despite reports of Note 7 catching on fire.
One customer said it was a matter of national pride. “As a South Korean we should purchase Samsung phones because we should think about the country,” said Shin Young-su, 50, who is self-employed. He said he was encouraging more young Koreans to buy Samsung phones to help the company.
Another customer who prefers Apple’s iPhone because of functionality with his other Apple devices said he didn’t think the latest crisis would hurt the Samsung brand. “The igniting issue is a problem for only few phones," Kim Sung-min, 38, who would only say he works in the service industry. “Even if a phone ignites in my hands, I believe Samsung will take care of everything for me. I believe in the brand.”