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SDI Battery Affiliate Struggles as Samsung Moves on from Note 7 Crisis

SDI Battery Affiliate Struggles as Samsung Moves on from Note 7 Crisis
Affiliate Samsung SDI is quietly reassuring anxious clients including Apple Inc that its batteries are safe, while in the shadows of Samsung Electronics' Note 7 smartphone crisis.
But as Samsung's biggest in-house parts supplier grapples with the reputational fallout from the Note 7 debacle, potential new customers may prove harder to convince.
Samsung SDI's TV and smartphone screens and batteries were key to Samsung Electronics' rapid growth and was created as a joint venture with Japan's NEC to make vacuum tubes in 1970.
But as it looks to add new customers and extend into electric vehicle batteries and renewable energy storage systems, it now faces a tougher challenge than its biggest customer and shareholder.
Samsung Electronics was quick to blame the battery for causing some Note 7 devices to catch fire. After replacement phones using batteries from China's Amperex Technology also caught fire, it has since widened its investigation into the exact cause of the fires in its near-900,000 won ($780) phones. But for Samsung SDI the damage was already done, analysts said.
since the problem first emerged, a fifth of the market value was lost and the third-quarter operating loss was more than double that of a year earlier for SDI, the main supplier of Note 7 batteries.
The Note 7 recall has had little impact on the willingness of users in the United States to buy the company's phones, showed a Reuters/Ipsos opinion poll on Sunday and shares of Samsung Electronics, however, are little changed over the same period.
"Since the first recall, we've had many inquiries from our clients, including Apple, asking whether batteries used in their products are safe," said a person at SDI who was involved in developing the Note 7 battery.
"We are also asking ourselves whether we should have done it (the Note 7 battery) this way, or whether there could have been other ways," the person said, declining to be named as he was not authorized to speak to the media.
SDI has carried out reliability checks on products with major customers and found no problems and has said the battery issue was limited to the Note 7. It has allowed customers to check batteries, which, it says, meant temporary shipment delays for a couple of customers and has set up teams to improve product safety.
"We put the utmost priority on battery reliability, and will use this opportunity to further enhance customer trust," Kim Hong-gyeong, SDI's chief financial officer, said on a conference call with analysts.
Some analysts say the impact could be lasting for SDI.
"This will have more of an impact on new customers than on existing customers," said S.R. Kwon, at Dongbu Securities. "SDI can assure existing customers ... but this could be a minus factor for SDI when it tries to attract new customers."
"The affected (Note 7) battery is totally different to the product we use so the issue doesn't really impact us," said an official at one of SDI's automotive customers. "But we're not happy," the person added, declining to say whether that may change its relationship with SDI.

Christopher J. Mitchell

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