Excluding nation from recall plan could hurt its image and sales: experts
South Korean electronic giant Samsung's exclusion of China from its latest recall plan for the problematic Galaxy Note 7 smartphone may negatively affect its sales and reputation in the Chinese market, experts said on Monday.
Chinese electronic manufacturers are not to blame for Samsung's faulty batteries used in the recalled smartphone, experts also noted, following reports from South Korean media that pushed off Samsung's responsibility by linking the cases of exploding batteries to its producers in China.
South Korean newspaper JoongAng Ilbo's Japanese edition reported on Saturday that batteries for the Note 7 were produced by Chinese firm ITM Semiconductor Co, with "Made in China" printed on the surface.
However, the Global Times found out that the Chinese manufacturer referred in the report, which is located in Dongguan, South China's Guangdong Province, is wholly invested by a South Korean company, with headquarters in Cheongju, South Korea, according to Chinese National Enterprise Credit Information Publicity System, an arm of the State Administration for Industry & Commerce.
This means that "the battery's research and development, as well as its production, are an embodiment of South Korea's technology," Liu Dingding, an independent industry analyst, told the Global Times on Monday.
Aviation authorities in several countries and individual airlines, including Dubai's Emirates Airline, Singapore Airline, Australia's Qantas, Virgin Australia, Pakistan International Airline and Japan Airline, have issued a variety of bans on the device from using or charging the phones to placing them in checked luggage. Airline companies in China have not rolled out similar bans as of press time.
Consumer confidence
China was not included in Samsung's global recall plan announced on September 2, which suspended sales of its Galaxy Note 7 and recalled 2.5 million units sold in up to 10 countries, including the US and South Korea, after reports of the device exploding while charging.
Pan Lin, director of Samsung's battery business in China, told the Global Times on Monday that "the only thing I can say is that Samsung's smartphones sold in China do not have any problem, because the battery is supplied by another company ATL [Amperex Technology Limited]."
Qiu Baochang, a partner at the Beijing-based Huijia Law Firm, told the Global Times Monday that simply stating the difference in battery suppliers and refraining from a recall in China leaves doubts among consumers.
"There has to be more detailed deliberations and more transparency over its troubleshooting to demonstrate that the products sold in the Chinese mainland needs no recall for good reasons. Clarifications should be made to both Chinese authorities and consumers," Qiu said, noting that a lack of measures from the Korean company will undermine consumers' confidence in the Samsung brand.
Troubleshooting takes time but hiding facts from the regulator may raise legal problems, he said.
"I'm worried about the product's safety issue, and am hurt by Samsung's different gestures toward the [Chinese] and foreign market," a Beijing-based white-collar worker surnamed Lin told the Global Times on Monday, noting she will not buy Samsung's latest smartphone, and would prefer to buy domestic brands, like Huawei and Vivo.
Samsung may lose business from Chinese consumers, like Lin, who will opt for other domestic mobile brands, Liu warned.
Importance of China's market
As a result, the company could see a drop in both its sales revenue and reputation in the Chinese market in the long run, he said.
"This will be a blow to the company's financial performance," as China has always been a significant market for Samsung's products, Liu noted.
In 2015, the company's electronic sales in China amounted to 31 trillion won ($26.8 billion), representing 15 percent of its worldwide revenues, according to Samsung's 2016 Sustainability Management Report.
Meanwhile, the company also serves as a dynamic pillar in South Korea's economy, accounting for 20 percent of the country's GDP, according to a report in People's Daily on Monday.
At a time of global economic downturn, Samsung's loss of the Chinese market could also suppress South Korea's economic growth, experts noted.
