23/01/2017 World Business Report


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23/01/2017

The latest business news with informed analysis from the world's financial centres.


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Nothing wrong with the phones, it was all in the battery - Samsung

:00:00.:00:26.

explains the reason why the Galaxy Note mobile phones caught fire and

:00:27.:00:31.

were recalled. The UK government to outline the industrial strategy.

:00:32.:00:35.

But with Brexit looming large, where will any government money go?

:00:36.:00:39.

Also in the programme: iPhone maker Foxconn signals $7 billion

:00:40.:00:45.

Korean electronics giant Samsung has released the results

:00:46.:01:00.

of its investigation into its flagship Galaxy Note 7 smartphones.

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In October last year the phones were recalled because some had

:01:04.:01:06.

The company today confirmed problems with the design saying

:01:07.:01:15.

the manufacturing of batteries was to blame, not the actual phones.

:01:16.:01:19.

The Note 7 was supposed to rival Apple's iPhone 7 but instead,

:01:20.:01:22.

the device caused massive damage to the company's profits,

:01:23.:01:25.

Last year, over 100 of the phones spontaneously burst into flames.

:01:26.:01:37.

This forced Samsung to halt production and recall millions

:01:38.:01:40.

globally months before the all important Christmas sales period.

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The debacle almost entirely wiped out the company's mobile business

:01:44.:01:46.

profit in the third quarter of last year,

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And this dragged total profits at the company down by 30%,

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Samsung itself predicted another three billion dollars could be wiped

:01:54.:02:00.

off profits over the next two quarters.

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The total cost of the recall has been estimated at around

:02:09.:02:11.

$5.3 billion, but the damage to the company's

:02:12.:02:13.

This is how one of the independent external experts that has helped

:02:14.:02:23.

Samsung find the cause of the fires summed it up.

:02:24.:02:31.

We need additional analysis to understand the root cause of the

:02:32.:02:37.

damage to the edge or corner of the battery which results in internal

:02:38.:02:45.

issues at that location. In summary design and manufacturing issues with

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the batteries led to failures of the devices.

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With me is Daniel Gleeson, Consumer Technology Analyst at Ovum.

:02:53.:02:55.

Good morning. Good to see you. So that was the big press conference

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that happened today. Give us more on where they went wrong. While it is

:03:03.:03:06.

good news for Samsung that it wasn't their own design that was the

:03:07.:03:10.

problem it was a problem on their behalf that they didn't do enough

:03:11.:03:15.

testing of the Note 7 and after they caught the problem and switched

:03:16.:03:18.

battery suppliers they asked the new supplier to go too fast too quickly

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and a whole new set of problems occurred with this new supplier. So

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there are a lot of lessons to be learned for other manufacturers as

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well as we try to shrink phones and pressure the batteries about how to

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design and test those issues. It was almost like the race was on to get

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this phone out there at the same time as the apple iPhone 7 and also

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Google launching its phone as well, there is so much competition right

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now that perhaps there I was off some of the detail. Exactly, and

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especially the last two or three months of the year are so important

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for any consumer device sales obviously with black Monday in the

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US leading into Christmas and most of the western world leading into

:04:05.:04:08.

the Chinese New Year at this time of year. So, what now, they have set as

:04:09.:04:12.

well today that they are not going to be launching their next news

:04:13.:04:17.

Samsung smartphone in February at the big mobile phone conference in

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Spain, which was expected. So, what now? Yes, the Galaxy S8, which we

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expected at the end of February we won't see until April, which gives a

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big window of opportunity for Sony, HTC, Huawei, launching flagship

:04:35.:04:38.

phones in the next month or two to make an impact on the market. For

:04:39.:04:42.

Samsung it was them in a difficult position because they are in a

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non-traditional launch window but I guarantee they will come to the

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market with the S8 and not only will it be very well-prepared and tested

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but they will come with millions of marketing to try to overcome the

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brand damage. How damaging has it been, how put off are we when it

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comes to buying a Samsung, are we keeping Samsung for the time being,

:05:04.:05:10.

our people staying loyal? I think with most controversies with mobile

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phones, it stuck in people's mind, it was a protracted recalled, that

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really pushed it into the public consciousness, the butt of

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late-night jokes on American TV networks, it was all over social

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media, so I think because of that it is a kind of issue that will stick

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with consumers for several months and will impact on a lot of

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decision-making. Ultimately I think Samsung can recover if they invest

:05:41.:05:44.

heavily enough into their market. And if nothing goes wrong again in

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future, you would imagine. Thank you for your time this morning. And

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there is much more detail on the story on the website, as with this

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story too, which we will discuss next.

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Foxconn, one Apple's biggest suppliers based in Taiwan,

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has confirmed it's considering setting up a display-making plant

:06:00.:06:01.

Sharanjit Leyl is in our Asia Business hub in Singapore.

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Interesting announcement from Foxconn? Indeed it is, and it was

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from none other than the chief executive Terry Go, part of Taiwan's

:06:22.:06:27.

technology giant Foxconn, basically confirming they are to set up a

:06:28.:06:33.

plant in the US, with Mr Go saying it might exceed $7 billion. It is a

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major supplier of apple and a likely generate thousands of jobs for the

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US, if it does indeed go ahead and the plans come after US President

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Donald Trump confirmed his America first agenda which is meant to

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overturn international trade treaties, which he said during his

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inaugural speech on Friday and during his campaign. Since his

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election he repeatedly threatened high import tariffs in order to try

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to encourage US as well as foreign companies to improve production in

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the United States and he singled out China as a significant cause of loss

:07:14.:07:18.

of manufacturing jobs in the United States. As we know, Foxconn doesn't

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just manufacture for Apple but for other global giants as well. It is

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formally known as Honhai Position and has most of its factories in

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China, where it assembles its iPhone. Very interesting. Thank you.

:07:34.:07:35.

See you soon. The UK Prime Minister Theresa May

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will today launch the government's vision for an industrial

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strategy for Britain. Our Industry correspondent

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John Moylan talks us through what the government

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is likely to announce. How can the government ensure the

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economy is fit for the future? For the Business Secretary Greg Clark

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places like this are part of the answer, it is a new automotive

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innovation centre in Warwick backed by government industry money and

:08:03.:08:09.

designed to keep carmakers firing on all cylinders. One of the things

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with industrial strategy is to build on the great success and also to

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help make sure that we drive growth in all parts of the country. The

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industrial strategy will be committed to driving very hard to

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spread the opportunities right across the country and to drive not

:08:26.:08:31.

just jobs but really good well-paid jobs in all parts of the country. It

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is going to be a big part of the strategy. Today the strategy will be

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outlined in a new green paper aimed at kickstarting wide-ranging

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consultation on the government's new vision, including plans for sector

:08:47.:08:50.

deals where businesses and stakeholders in specific sectors can

:08:51.:08:53.

make the case for government support. That is just one of ten

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so-called strategic pillars which are all designed to increase

:08:58.:09:02.

productivity and drive growth. In the past, governments used

:09:03.:09:06.

industrial strategies as an excuse to back key firms or industries. It

:09:07.:09:10.

didn't always work. As we prepare for the challenges of leaving the EU

:09:11.:09:17.

the big test of this plan will be that it doesn't just deliver for

:09:18.:09:20.

successful firms like this but that it reaches out to all parts of the

:09:21.:09:25.

UK to deliver the government's aim of an economy that works for

:09:26.:09:26.

everyone. United Airlines says in a statement

:09:27.:09:29.

it grounded all domestic flights You might have noticed if you try to

:09:30.:09:32.

fly on Sunday. It did not give any more details,

:09:33.:09:39.

and it was not immediately clear how The Chicago-based Airline

:09:40.:09:43.

and United Express operate more than 4,500 flights a day to 339

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airports across five continents. So, let's hope they have fixed that

:09:48.:10:01.

problem. Looking at market very quickly and we have a stronger yen,

:10:02.:10:05.

the dollar falling in value, affecting Japan, and that is merely

:10:06.:10:08.

because the news out of the new president so far hasn't really been

:10:09.:10:13.

about how to boost growth but more political issues and issues that

:10:14.:10:16.

could cause a must as opposed to host growth and help the world's

:10:17.:10:21.

biggest economy, so disappointment for financial markets so far on the

:10:22.:10:24.

Trump effect for the global economy - that is down for the dollar and up

:10:25.:10:29.

for the yen, which is not helping exporters in Japan. I will see you

:10:30.:10:31.

soon.

:10:32.:10:34.