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Signs advertising the Galaxy Note 7 smartphone are removed from Samsung Electronics PR office in Seoul‘s Seocho district

Samsung Electronics is facing another crisis as unexplained fires continue to plague its Galaxy Note 7 smartphone.

Now the Note 7’s fate appears to depend on findings from an investigation by the US Consumer Product Safety Commission (CPSC). The company could have to abandon the Note 7 altogether if the worst happens and the product is ruled flawed, while experts are suggesting structural issues beyond the manufacturing process may have made the situation worse.

In an Oct. 10 announcement, Samsung Electronics said it was “adjusting supplies for the sake of a careful investigation and stronger quality management after fire-related damage involving the Galaxy Note 7.” The same day, it called a temporary halt to production of the Note 7 at its factories in Gumi, North Gyeongsang Province, and Vietnam. Later that afternoon, it discussed safety measures with domestic telecommunications companies and requested a halt on Note 7 sales.

In its Sep. 2 decision to recall all Note 7 units, Samsung Electronics identified the battery as the cause of the mystery fires and said it was “carrying out a careful analysis with the battery suppliers to determine the quantity that could be defective.” It subsequently concluded that the issue lay in a Samsung SDI battery used in items marketed in South Korea and the US. In a “product collection plan” submitted to the Korean Agency for Technology and Standards (KATS), it identified the cause of the problem as “overheating resulted from the negative and positive electrodes coming into contact due to pressure on the plates within the cell as a result of issues with the cell manufacturing process at a certain battery manufacturer.”

But its swift decision to recall the phones nine days after the first reports of combustion ended up blowing up in its face. So far, nine cases of fires involving replacement items have been reported, including five in the US, one in South Korea, one in China, and one in Taiwan. Major US telecoms like Verizon, AT&T, and T-Mobile have halted all sales and exchanges of the Note 7, blocking the product’s US sales channels.

The question of where things go now appears to hinge on the CPSC findings, which are likely to be released in the near future. The CPSC is currently investigating a case of combustion that occurred on a passenger aircraft at an airport in Kentucky. If serious defects are found in the replacement items - and if US authorities impose heavy measures in response - the Note 7 will have even fewer avenues available.

“Depending on what the investigation finds, they may have to consider discontinuing the model,” said one electronics industry source.

Some experts are suggesting the manufacturing process may not be the only problem.

“If you look at data from the safety advisory committee of the Ministry of Trade, Industry and Energy‘s Korean Agency for Technology and Standards, Samsung Electronics hadn’t even determined the cause of the fires by late September, when it released the new Galaxy Note 7,” said Park Chul-wan, inaugural director of the Center for Innovation in Advanced Batteries and a secondary battery expert.

“Since they decided that the cause of the mystery fires must be the batteries and have perceived the issue in those terms, they aren‘t really looking for issues beyond the batteries, things internal to the phones,” Park said.

Others are viewing the issue in terms of technological limitations and issues with vertical integration and parts supplies. The smartphone was developed to meet two seemingly conflicting goals: achieving slimness while producing a long-lasting battery. By nature, battery capacity is proportional to size. Any attempt to make a small battery with high capacity carries possible side effects.

When first launched in 2011, the Galaxy Note phone measured 9.7 mm thick. It grew even slimmer with the Note 2 (9.4 mm) and Note 3 (8.3 mm). For the Note 4 in 2014, the width grew slightly to 8.5 mm. The Note 7 released this year measures 7.9 mm. It’s 0.3 mm thicker than last year’s Note 5, but has a 20% higher battery capacity at 3,600 mAh, compared to the Note 5’s 3,000 mAh. Battery capacity for the Note 7, which is sealed for protection against water and dust, is even higher than the 2,910 mAh for Apple’s recently released iPhone 7 Plus and the 3,200 mAh for LG’s V20 smartphone.

“It’s not easy to increase battery capacity while reducing the outer width by one millimeter,” said one smartphone development designer.

Vertical integration in the phone’s parts supply has also been identified as a problem. The batteries in the recalled items were reportedly supplied by Samsung SDI, a Samsung affiliate, with some batteries provided by China‘s ITL. Other companies that used to supply batteries to Samsung Electronics domestically were absent from the supply chain. One possibility is that the partner companies failed to develop the necessary battery technology due to supply cost issues.

The blow to Samsung Electronics stands to grow even bigger if the situation gets worse. An analyst at one securities company predicted that the 1.4 million already sold units subject to recall and the one million units in replacements or newly sold items could amount to up to 2 trillion won (US$1.8 billion) in refunds and other losses.

“It’s definitely a big loss, but the big thing is losing consumer trust,” the analyst fretted.

The brand image has also taken a big hit from signage posted in airports around the world asking travelers not to use the Note 7. With Apple’s new iPhone 7 set to go on the market in South Korea on Oct. 21, Samsung Electronics now finds itself in even more of a losing position against one of its biggest competitors.

By Lee Wan, staff reporter

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