Samsung may source batteries from LG Chem

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Samsung may source batteries from LG Chem

Samsung Electronics is in discussions with LG Chem over batteries for future smartphones as the company seeks to diversify suppliers in the aftermath of the Galaxy Note7 debacle.

For the discontinued Note7, which was prone to meltdowns or explosions that have yet to be explained, Samsung sourced batteries from two companies. One was its affiliate Samsung SDI, which is estimated to have handled more than 60 percent of the entire volume, and the other was Amperex Technology Limited, a Chinese producer.

Although Samsung has yet to pinpoint the exact cause to the problem, Samsung SDI’s 3,500 mAh batteries were considered as one of the possibilities. Some analysts say Samsung could have been able to better cope with the situation if it had an additional supplier.

“Samsung failed to properly tackle the crisis, as it only received batteries from only two suppliers,” said an executive in the industry.

Duff Lu, research manager at market researcher TrendForce, pointed out that the Note7 scandal “exposes Samsung’s flawed strategy of allocating most of its smartphone battery orders to Samsung SDI.

It is a rarity to have a vendor handing over 60 percent of its orders to one battery maker. Apple, for instance, never allocates more than 40 percent of its iPhone battery orders to its largest battery supplier, ATL.”

Apple’s measure effectively spreads the risk of encountering problems with product quality, he noted. In fact, the iPhone producer has divided its battery supply chain into battery cell manufacturing and battery assembly.

During the April-June period of this year, ATL was the world’s top lithium-polymer battery producer with 20 percent market share, followed by Sony with 18 percent and Samsung SDI and China’s Lishan with 11 percent each. LG Chem ranked fifth with a 10 percent market share.

Samsung and LG, direct rivals in smartphones and many other consumer products, have a rule not to use each other’s devices or components.

That rule is breaking down. In September, Samsung began using LG Innotek’s 2-metal chip-on-film, a film-type component that connects chips and display panels to a main circuit board. LG Innotek’s product has a competitive edge over other chip-on-films in that it is bendable and foldable. Amid the rising popularity of curved-screen smartphones, the demand for the LG Innotek component rose.

Should Samsung Electronics and LG Chem strike a deal, it will be another milestone given that the battery is a key part of a smartphone. The partnership could open the possibility for the two tech giants collaborate in fields that may produce synergy effects.

For any component to be embedded into a new smart device, it takes at least six months of development and optimization between manufacturers. That means the upcoming Galaxy S8 smartphone, scheduled to be unveiled in February, could be powered by an LG Chem battery.

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