Bloomberg: Samsung rushed Note 7 to beat a potentially bland iPhone 7

The battery issue arrived at the worst moment for Samsung... This may indeed be due to the change in top management.

This expedited schedule to deliver the first Note with Dual edge display, not to mention an iris scanner and waterproof housing, coupled with the desire to produce most of it in-house, including the battery, has played badly on the quality assurance front, it seems. Granted, one can expect hiccups with the first batches of most major handsets, but not explosions. Long story short, Samsung placed unusual strain on suppliers to come out with a phone intended to capitalize on a supposedly mild iPhone upgrade this year, and, while the Note 7 was met with delight globally, the results of this hectic schedule to include the latest and greatest showed up in the most unfortunate manner. 

So, what happened exactly? Well, Samsung's SDI subsidiary, which for the first time was tasked with producing all Note 7 battery packs, save for the units made in China, apparently tasked the packaging of its own battery cells to subcontractors, and shoehorned a slightly larger battery than the compartment it was made for. While the difference might have been minimal, this placed unnecessary pressure on the battery pack, squashing the isolation plates between the anode and cathode, and short-circuiting the battery, resulting in the thermal runaway we've seen from multiple reports already.

After the first case that appeared online, on September 1 a Samsung engineer immediately posted on the company's internal forums: "Please recall all Note7s and exchange them with new ones. I don’t have to get my PS [profit sharing bonus]. It’s humiliating.” After a brief consultation with the employees, DJ Koh, the head of the mobile division, went out and announced a total recall on the next day. The recall erased 2-3 weeks of Note 7 sales between its announcement and the the first safe appearing in the warehouses, and will reportedly now cost Samsung upward of $2 billion, not including the brand damage. 

This can't come at a more unfortunate moment for Samsung - the chairman Lee who was centralizing the decisions before, has been hospitalized for the last two years, and the culture there sniffs at his heir taking the helm while he is still there. Faced with the management challenges, however, Samsung just promoted Lee's son to the top, and he had to immediately deal with the largest company crisis in decades. The older Lee set the course for Samsung to become a top phone maker by setting a pile of the company's badly produced handsets on fire two decades ago, and demanding that employees focus on quality, but Samsung might be back to square one on that front now. Plus, the iPhone 7 duo turned out to be a pretty big upgrade, and millions of users are now poised to swap their older iPhones with the new models, while some of those who intended to go Note, might now add to the pending demand.

source: Bloomberg