The company opens up about the source of one of history's worst tech product recalls.
Sure, blame the batteries. But it's not quite that simple.
During a press conference Sunday, Samsung said two separate battery defects caused both the original batch of Galaxy Note 7 phones and the replacement units to overheat.
The first battery, it said, suffered from a design flaw. The battery's external casing was too small for the components inside, causing it to short-circuit and ignite.
The second battery, which came from another supplier, didn't have the same flaw, Justin Denison, head of product strategy and marketing for Samsung's US arm, said in an interview ahead of the press conference. In the rush to pump out enough batteries for the replacement units, though, the supplier introduced a manufacturing defect that led to the same result, he said.
The explanation puts to rest the mystery behind the exploding Note 7, but it kicks off a new challenge for the embattled company: winning back your trust after a disastrous several months that included two recalls and the decision to kill the critically acclaimed phone. The Sunday press conference marked the start of a Samsung campaign to rebuild company credibility, which will include the upcoming launch of the flagship Galaxy S8 phone, as well as another Note later in the year.
"It was a painful crisis to me," D.J. Koh, Samsung's mobile chief, said in an interview ahead of the press conference. He called it the worst stretch in his 33 years with the company.
Having not one, but two batteries from different suppliers fail -- for different reasons -- is a bizarre coincidence that may surprise and frustrate some who were looking for a single, clean explanation.
On Sunday, Koh was joined by UL, Exponent, and TUV Rheinland, three independent testing firms that came to most of the same conclusions as Samsung -- that it was the battery, and not the phone's design or Samsung's manufacturing process, that cause the Note 7 battery issues.
"The electronics [designed by Samsung] did not contribute to the failure of either manufacturer's [battery] cells," Kevin White, principal scientist for Exponent, said Sunday during the press conference.
The Note, while not Samsung's top-selling phone line, is an important device for the company. It's one of two big flagship introductions each year, and the Note 7, in particular, was meant to take on Apple's iPhone 7 Plus, which hit the market in September. Samsung says its most loyal base of customers across all of its products are those who've bought Note models. Just look at the thousands of Note 7 users still on Verizon -- the carrier is routing calls to its customer service to get them to turn the phones in.
Samsung expects the Note 7 debacle, which resulted in 3 million recalled phones, to cost it more than $5 billion. That's not including the hit to its reputation, which could take months, or even years, to repair.
The biggest task for Samsung this year will be regaining consumer trust, showing customers and potential customers that its devices are safe and that the company won't make the same mistakes again. Its top executives, speaking with CNET, said Samsung hoped the transparency would mark a good first step.
"When companies do this right, on average 18 months is the time period for turning around a reputation," said Thomas Cooke, a professor at Georgetown's McDonough School of Business. "Samsung is on the way to recovery. I think it can be done."
Shortly after the Note 7 went on sale in mid-August, users started reporting overheating problems. Samsung originally tied the issues to a battery flaw and recalled all the Note 7 phones on the market. That didn't fix the problem, however, with the replacement devices also overheating. Samsung launched a rare second recall in October and stopped manufacturing the Note 7. Its focus then turned to finding out what went wrong.
Samsung tackled the Note 7 investigation as it approaches other challenges -- with a lot of manpower. It built a testing facility in each of the four locations it manufactures its phones: Gumi, South Korea; Hanoi, Vietnam; and Huizhou and Tianjin, China. Together, those sites tested more than 200,000 Note 7 devices with batteries and more than 30,000 batteries on their own. Samsung had more than 700 engineers from its mobile division dedicated to the testing process. (Samsung has more than 70,000 engineers in the broader company, but they're spread across its various divisions.)
The engineers looked at software, hardware, manufacturing process, quality and assurance testing, and supply chain. They looked at things like whether the iris scanner or software algorithms caused overheating, or if the device's fast-charging capabilities had an impact.
Initially, it was to no avail. "[There was] nothing in this round of hardware, nothing in the software, nothing in the processes, logistics, that could have contributed," Denison said.
Samsung turned its focus to the batteries themselves. Throughout the testing process, engineers were able to cause batteries to overheat, both in the device and on their own.
Samsung had two separate suppliers for its Note 7 batteries, which were custom-made for the Note 7. It specified the characteristics, like the voltage and physical size. Then it was up to its suppliers to design and manufacture the batteries as they saw fit. "If you open up Battery A and Battery B, they're different batteries," Denison said.
Samsung declined to confirm the names of the two suppliers, but the US Consumer Product Safety Commission said Samsung SDI (which is separate from Samsung Electronics but has the same parent company, Samsung Group) supplied the batteries responsible for the first recall. Hong Kong-based Amperex Technology acknowledged on its site that it was the second supplier. Amperex declined to comment following Samsung's report, while a representative from Samsung SDI said no one from media relations was immediately available.
In the first supplier's battery, dubbed Battery A, Samsung discovered a design flaw that caused the battery to short-circuit. The supplier created a pouch (the battery's outside casing) that didn't have enough space to allow the battery to expand and contract when going through normal charge and discharge cycles. That caused the positive and negative electrodes to touch, short-circuiting the battery.
(Some earlier reports speculated that Samsung's phone itself didn't leave room for the battery to expand. That wasn't the case, but Samsung plans in the future to leave even more room inside its devices for the battery.)
In the case of Battery B, from Samsung's second supplier, the flaw was related to manufacturing and quality issues. The initial batteries from that supplier worked fine in earlier Note 7 devices, but when Samsung increased its order and pushed that supplier to become its sole battery provider, the battery maker introduced errors. Some protrusions were left over from the ultrasonic welding process that caused the battery to short-circuit.
Samsung had asked the second supplier to build about 10 million new batteries. "Ultimately, they were not able to manufacture those with sufficient quality," Denison said.
One of the biggest questions facing Samsung during the Note 7 fiasco was how its quality and assurance process (the tests its phones go through before being sold) didn't catch the problem.
Samsung would have had to do an X-ray test on Battery A to find the problem, while Battery B would have required Samsung to disassemble it to find the error. Neither of those were steps in Samsung's normal testing process but were handled by the battery manufacturers, Koh said.
Samsung is now changing its testing process for key mobile components. For its batteries specifically, Samsung is instituting an eight-point inspection process. Some of the steps previously were handled by its suppliers; some are new.
"There are going to be some tests we're going to do that we believe go well above and beyond the industry standard," Denison said.
One check is a durability test that examines the battery when it's been overcharged, punctured by a nail or exposed to extreme temperatures. Samsung will visually inspect each battery and do an X-ray test to check for abnormalities. It will put the batteries through a large-scale charging and discharging test, will simulate accelerated consumer usage scenarios, and will disassemble the batteries to inspect the overall quality. Other tests will look for leakage of the battery component and the complete device, or for any change in voltage through the manufacturing process.
The upcoming Galaxy S8, Samsung's new flagship phone expected to launch this spring, falls under the new inspection process, Koh said.
"When the second...recall happened, that was the exact time that we were starting the design of the battery for the S8," he said. "All [new] manufacturing processes are reflected on all 2017 models."
He added that the Note 7's issues didn't have a "huge impact" on the Galaxy S8's release date. "We added staff to make it safer," Koh said. "But that doesn't affect the schedule. Nothing meaningful."
Samsung also confirmed it wasn't giving up on the Note brand. The company plans to bring out a successor to the phone, the Galaxy Note 8, Koh said.
As for the Note 7, 96 percent of the 3 million Note 7 buyers around the globe have traded in their phones. In the US, the official tally is 97 percent, but Tim Baxter, president of Samsung's US arm, claims it's actually closer to 99 percent because more than half of the remaining units are no longer connected to cell networks.
Beyond opening up about the problems, Samsung hopes taking a more industrywide view will help the company score some karma points.
Samsung is talking to global standards groups about sharing its new battery review process, Koh said. His hope is that everyone follows similar guidelines, which may address issues such as hoverboards catching fire.
"If we contribute this as a global standard, then I strongly believe that will definitely increase the lithium-ion battery safety," he said.
Koh added that Samsung would make its intellectual property around battery safety and standards freely available.
Ultimately, Koh understands it will take awhile to rebuild Samsung's lost credibility.
"For customers, we have to develop innovation, but customer safety is the priority," he said, noting that Samsung had to keep delivering products. "In the end, we can win the customers' trust back."
First published Jan. 22, 5:00 p.m. PT.
Update, Jan. 23 at 10:00 a.m. PT: Adds more background on Note 7.
Update, Jan. 22 at 6:15 p.m. PT: Adds comment from Exponent and data on number of Note 7 units traded in.
Update, Jan. 22 at 7:05 p.m. PT: Adds Amperex declining to comment.
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