Analysts ask: Did Samsung cut corners in shipping Note7 replacements?

Billowing smoke from apparent Note7 replacement unit caused Southwest jet evacuation

Smoke billowing from what appears to be a replacement Samsung Galaxy Note7 caused the evacuation on Wednesday of a Southwest jet on the ground in Louisville. No one was injured.

Samsung is trying to retrieve the Note7 to verify whether it is indeed a replacement unit. Meanwhile, the U.S. Consumer Product Safety Commission and other federal authorities are conducting investigations.

If it is indeed a replacement Note7, Samsung will face some tough questions about whether it cut corners in offering replacement Note7 devices to customers that Samsung had deemed safe, analysts said today.

"This is a huge blow for Samsung as it basically invalidates everything they have done thus far and makes people not trust what is in store," said Carolina Milanesi, an analyst at Creative Strategies.

"It is not a good scenario for Samsung," added Jack Narcotta, an analyst at Technology Business Research. "Even when it does the right thing [with its recall of original Note7s] -- and maybe cuts a few corners to do that -- it still can't wrestle the problem to the ground."

Jack Gold, an analyst at J. Gold Associates, said there are many possible explanations for what caused Note7 to begin burning, including: the manufacturing process didn't work on this particular device; the batteries are still problematic; or the device had a faulty charging unit.

"We'll see if any additional remanufactured units have the same problem," Gold added. "All modern phones with high-capacity lithium-ion batteries and [that are] fast charging face this potential problem. We just don't hear about them because they are relatively small in number."

However, Gold added, the Southwest jet evacuation over the smoke emitted by the Note7 unit is "clearly a problem for Samsung...They absolutely need to find the problem with this device and fix it quickly."

The owner of the device aboard Southwest flight 994, identified as Brian Green, told several television news stations that he put the Note7 in his pocket after trying to power it down while the jet, bound for Baltimore, was parked at the gate in Louisville. He told CBS This Morning that he first heard popping and sizzling sounds, then added, "there was smoke just billowing, pouring out of my pocket."

Green took a photo of the burned Note7 on the floor of the plane where he had dropped it, and also provided a photo of the box it came in, to show it had a black square symbol to indicate a replacement Note7. He told The Verge and other news outlets that he picked up the new phone at an AT&T store on Sept. 21.

When the serial number for the phone was run through a Samsung recall eligibility checker online, a message responded that it was not one of the units affected by the recall, according to reports. Green also said the phone was at about 80% battery capacity and that he has used only a wireless charger since receiving the device.

Green could not be reached for additional details, including whether he had successfully turned the phone completely off before putting it in his pocket.

No one was injured in the evacuation of the jet, and customers were directed to other flights, Southwest said in a statement.

Samsung also issued a statement that said it will verify if Green's phone was a replacement: "Until we are able to retrieve the device, we cannot confirm that this incident involves the new Note7. We are working with authorities and Southwest to recover the device and confirm the cause. Once we have examined the device we will have more information to share."

Only last week, Samsung assured the public its replacement Note7 smartphones were safe. It was an attempt to reassure customers who were concerned about reports from South Korea, China and the U.S. that replacement devices were running too hot.

"We would like to reassure everyone that the new Note7 phones are operating properly and pose no safety concerns," the company said on Sept. 30. "In normal conditions, all smartphones may experience temperature fluctuations."

Some analysts have commended Samsung for updating the public regularly on its global recall of Note7s, but are nonetheless concerned by the latest reports that a replacement unit could burn so hot that it would begin smoking and burn through its case.

"I have been monitoring some claims in China of the...Note7 with the 'good' battery catching fire, but not a single one of these incidents has been traced back to Samsung," said Patrick Moorhead, an analyst at Moor Insights & Strategy. "So, for right now, we all need complete information before jumping to any conclusions. If it is verified that the phone is, in fact, a replacement phone, Samsung will have some major problems on its hands."

Samsung first issued its own recall of the original Note7 globally on Sept. 2 and the U.S. Consumer Product Safety Commission (CPSC) officially recalled 1 million devices in the U.S. on Sept. 15.

At the time, the CPSC said it had received 92 reports of batteries overheating in the original devices, including 26 reports of burns and 55 reports of property damage.

After Wednesday's Southwest evacuation, the CPSC issued a statement from its chairman, Elliot Kay, that the agency is "moving expeditiously" to investigate by contacting Green, Samsung and the Federal Aviation Administration. Kay reiterated that Note7 customers who haven't obtained a replacement device need to power them down.

Kay also reminded the public that consumers don't have to take a replacement Note7 unit and can seek a full refund from Samsung or the carrier where it was purchased.

Green told reporters that he was relieved that the smoke from the Note7 aboard the Southwest jet didn't cause more harm other than destroying the device itself and a burned carpet on the jet. There might have been a disaster if the phone caught fire while he was driving or if it was stored in a suitcase in the luggage compartment of the plane. "It could have been a lot worse," he told CBS.

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Matt Hamblen

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