By
Se Young Lee
In
its rush to beat rival products to market, notably Apple's new iPhone, Samsung
Electronics has accelerated new phone launch cycles, but its haste is raising
concerns that it fell short on quality testing.
Since
last year, the South Korean firm, the world's largest maker of smartphones, has
brought forward the launch of its Galaxy S and Galaxy Note series models by
roughly a month.
For
the June quarter, the strategy helped Samsung to its best profit in more than
two years, but it is also putting strain on its supply chain and its
manufacturing reputation.
On
Friday, two weeks after launch, Samsung recalled Galaxy Note 7 smartphones in
10 markets including South Korea and the United States after finding its
batteries were prone to ignite, and halted sales of the 988,900 won ($891)
device in those markets indefinitely.
The
recall looks set to hamstring a revival in Samsung's mobile business just as
Apple gears up to launch its new iPhones this month.
"Samsung
might have over-exerted itself trying to pre-empt Apple, since everybody knows
the iPhones launch in September," said Chang Sea-Jin, business professor
at Korea Advanced Institute of Science and Technology and author of "Sony
vs. Samsung", a history of the electronics giants.
"It's
an unfortunate event; it feels like Samsung rushed a bit, and it's possible
that this led to suppliers also being hurried."
Samsung
said in a statement to Reuters it conducts "extensive preparation"
for its products and will release them to the market "only after proper
completion of the development process".
The
firm said on Friday it had identified a problem in the manufacturing process of
a battery
supplier it didn't name.
"I
am working to straighten out our quality control process," Samsung's
mobile business chief Koh Dong-jin said then.
The
scale of the unprecedented recall, which some analysts forecast will cost Samsung
nearly $5 billion in revenue this year, follows a separate supply-chain
management issue that led to disappointing sales of the Galaxy S6 series last
year.
Samsung
executives said production problems for the curved screens and metal casings
used in the Galaxy S6 edge led to a supply shortage for the device, leaving the
firm unable to capitalize on the critical acclaim the phone received, sapping
earnings momentum.
GETTING
AHEAD
Counterpoint
analyst Jeff Fieldhack said Samsung stole the thunder from local rival LG
Electronics' launch of the G5 smartphone this year by starting the sales of the
Galaxy S7 smartphones a month earlier and backing them with an aggressive
marketing campaign.
"I
believe they were trying to create a similar effect by beating Apple to market
by (about) a month, too," he said.
"Very
often, lab times and testing periods are shrunk to expedite approval and
time-to-market of key devices. It is possible all charging scenarios were not
thoroughly tested."
Samsung
SDI, one of two makers of batteries for the Note 7 - the other has not been
identified - said it had not received notice from Samsung Electronics regarding
its batteries and declined to comment further, including whether its batteries
were found to be faulty. The company declined to comment on a local media
report that it had production difficulties and struggled to meet orders in
time.
While
there are occasional reports of phones catching fire or burning users, recalls
for such problems are rare. The problem is exacerbated by the fact that
batteries in the Galaxy Note 7 cannot be removed by the user - a design
decision to make the phones slimmer and waterproof.
A
Samsung executive who declined to be named told Reuters before the recall
announcement: "Our production engineers and managers are extremely
experienced, and if you ask them to find a solution to adopt a design change,
they'd promptly bring things under control.
"But
even that capability is under growing strain, as we try out new materials and
everything is on a very tight schedule."
Local
brokerage Korea Investment cut its third-quarter operating profit forecast for
Samsung by 1.1 trillion won to 7.1 trillion won due to the recall, though it
said the event would not derail the broader rebound of its smartphone business.
If
haste contributed to the problem, it could now help Samsung limit the impact of
the recall.
Shares
in Samsung were up 0.8 percent in mid-day trade on Tuesday, 4.4 percent below
record highs reached two weeks ago, as some investors welcomed the swift
decision to launch a global recall.
****Culled
from reuters.com
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