Opinion: Batterygate will cost, not kill, Samsung | Business| Economy and finance news from a German perspective | DW | 11.10.2016
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Opinion: Batterygate will cost, not kill, Samsung

The Galaxy Note 7 was supposed to be Korean mobile phone giant Samsung's hot new product. That turned out to be too true - and now the fiasco could end up burning holes in Samsung's pockets, writes DW's Henrik Böhme.

It's everyone's favorite toy. The smartphone is in all our pockets - but it has a problem. At least the new top device from the world market leader Samsung does.

Because the built-in battery in the Galaxy Note 7 is too big, it can heat up so much that it can catch fire. That can be an unpleasant surprise, more so in your trouser pocket than in your handbag. But it is also dangerous. So dangerous that some airlines have alreadyforbidden their passengers from taking them on board.

Henrik Böhme

DW's Henrik Böhme

Of course the announcement of the cancellationof the Note 7 is an unprecedented disaster for Samsung, at least for the huge company's mobile phone division. Samsung also builds ships, television and washing machines, is active in biotechnology, and also provides financial services such as insurance. With almost 500,000 employees, the company generates at least one-fifth of South Korea's economic output. But because the smartphone division is just one part of this giant, even if an important one, it will survive this matter.

Who in Germany had heard of the largest conglomerate on the Korean peninsula 20 years ago? The first Samsung phones to appear here were laughed at. Later, as smartphones took the world by storm, the first Samsung models to emerge met a similar response; they were very fiddly to operate. Today, Samsung is the world's biggest maker of smartphones. At its peak, its share of the world market was over 30 percent; today one-fifth is still in Samsung's hands. It was a similar development with TV sets. In Germany, the Korean giant has long been the market leader.

Apple is not the danger

Now this disaster. Of course, it could cost the company its top ranking. And if it turns out that any Americans have burned their fingers on a Note, it could get very expensive. But it is also clear that Apple, Samsung's largest competitor in the US, is unlikely to benefit from it. A much greater danger to Samsung are the many Chinese mass manufacturers such as Huawei, ZTE, Oppo and Xiaomi. That's because Samsung, unlike Apple, not only focuses on expensive devices, but also serves the mass market in developing countries.

Many are already drawing comparisons with German automaker Volkswagen and its Dieselgate scandal - the reasoning being, it could happen to anyone. This is not even cold comfort - it is wrong in many respects.

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Talk: David Buik on the economic impact of the burning issue on Samsung

Of course, even world conglomerates like Samsung, VW and even Toyota, which have been driving gigantic recall campaigns for years, can be thrown for a loop by such scandals. But unlike the emissions-cheating software VW deliberately installed, the burning batteries are a technical failure.

Surely they could have been tested more extensively, but the Koreans were obviously under pressure to come to the market at the same time as Apple's new top device, the iPhone 7. Now, Samsung is honest enough to admit that it is unable to get a grip on the battery problems and that it will halt production. In contrast, Volkswagen still plans to sell diesel cars in the US.

And yet there's something Dieselgate for VW and Batterygate for Samsung are likely to have in common: Volkswagen's scandal has barely dented its sales figures. It will also be similar with Samsung. It's much ado about a few burning smartphones.

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