It has been an autumn of discontent for South Korea’s Samsung Electronics. Less than two months after it launched the Galaxy Note 7—then touted to be the challenger to the iPhone7—Samsung has ceased sales and production after the Note 7 started exploding due to lithium-ion battery problems. Lithium-ion has been the preferred choice for smartphone batteries as they charge faster, last longer and have a higher power density. As the battery heats up, lithium, which is a highly volatile substance, sometimes explodes and melts. There have been many cases of lithium-ion cells causing fires in batteries over the years. Samsung has not disclosed what made the devices to smoke and explode. The impact of ceasing production was immediate—the company’s market capitalisation fell $17 billion in just a day. Samsung shares fell 8%, its biggest one-day decline in eight years. The hit on the Samsung brand which has faced problems from regulators, consumers and investors is bigger. The big worry would be if people lose trust in the brand.
Samsung’s problem is quite similar to the nightmare that Johnson & Johnson’s (J&J) faced in1982 when seven people died after taking cyanide-laced capsules of Extra Strength Tylenol. J&J withdrew the entire lot of the painkiller and re-launched it in tamper-proof packaging. Soon, it was back in the market. Samsung needs to think out of the box and quickly, so as to ensure that it can over time retain its share—22.8% in Q2 2016—of the worldwide smartphone shipments. Samsung’s advantage lies in the fact that it has a strong line-up of products and has been among the most innovative companies in the space. Hopefully, that would help it tide the current crisis.