Samsung's impact on Korean economy

Samsung Electronics has temporarily halted production of its Galaxy Note7 smartphone, after five cases of explosion have been reported on the replaced phones. “There have been adjustments to the production volume in order to conduct precise investigations and reinforce quality management following the recent damaged caused by fire,” announced Samsung on Monday upon request for public notice from Korea Exchange. The measure came in 52 days after the launch of the model and 38 days since they decided a recall after a series of battery explosions. AT&T and T-Mobile, the second and third largest U.S. wireless carriers, have altogether suspended the sales and replacement of the Note7 phones, which is likely to be followed by South Korean carriers as well.

Ko Dong-jin, president of Samsung's mobile division, ordered a prompt all-out recall of the model after concluding that the batteries manufactured by Samsung SDI were defective. However, the fact that the replaced models have also caught fire indicates that the root cause could be elsewhere, within the process of design, manufacturing, or software. The recent series of incidents took place when the consumers were on the move, not during charging. The situation seems to have gotten worse by Samsung’s attempt to hastily cover up the issue without thoroughly investigating the root cause of the problem.

Samsung has been prone to any large-scale crisis since its operating profit dropped sharply in 2014 after reaching its peak the previous year. The company has lacked innovative and challenging spirit to become the "first mover" but instead focused on cost-saving by staff restructuring and developing "fast follower" technologies to catch up with the industry leaders. Any global business could face a crisis, but the one Samsung is facing now is more shocking because the culprits is within itself and the results are unforeseen.

The conglomerate takes up 13.8 percent of South Korea’s whole economy, an unprecedented number compared to other major businesses in advanced nations. It is not an exaggeration to say that when Samsung falls, the Korean economy falls. Samsung Chairman Lee Kun-hee held a symbolic burning ceremony of cell phones and facsimile machines at Gumi complex in 1995, when their defection rates did not improve. Now it may be the time for another such self-reform for Samsung to recover consumer trust and get back on track.