George Frey—Getty Images

The company's report says faulty battery design and production are to blame.

By Reuters
January 22, 2017
January 22, 2017

Samsung Electronics ssnlf on Monday said faulty batteries caused its flagship Galaxy Note 7 phones to catch fire and announced steps to avoid repeat incidents, as it tries to restore trust and regain momentum in the smartphone business.

The announcement came more than three months after Samsung scrapped the short-lived competitor of Apple’s iPhones, wiping $5.3 billion off its operating profit in one of the biggest tech failures in tech history.

In its first explanation of the cause of the debacle, the world’s top smartphone maker ruled out problems with the premium device’s hardware and software, and said there would be no repeat of the fires in future devices such as the upcoming S8.

“We look forward to moving ahead with a renewed commitment to safety. The lessons of the past several months are now deeply reflected in our processes and in our culture,” the company said in a statement.

While Samsung Electronics’ mobile division is expected to have bounced back from the Note 7 failure during the fourth quarter, investors remained cautious about the outlook due to uncertainty about how the Note 7 fires would affect sales of future flagship devices.

“Consumers will not be reluctant to buy the S8, expected in April or May, only if Samsung clearly finds out what caused the fires,” Hi Investment analyst Song Myung-sup said.

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Investigations by the company and independent organizations found that the batteries were the sole cause of the Note 7 fires, Samsung mobile chief Koh Dong-jin told reporters during a briefing in Seoul.

Reports of Note 7 handsets catching fire spread on social media soon after their August launch. A recall to replace the batteries did not solve the problem, prompting a second recall and a discontinuation of the model in October.

Despite the impact of the Note 7’s demise, the South Korean firm expects fourth-quarter operating profit to hit a more than three-year high, driven by booming chip sales. That forecast pushed Samsung’s share price to a record high this month.

Samsung will announce its final earnings figures on Tuesday.

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