When competing with Apple, what you don't need is for your new model to be prone to fires. Such was Samsung's fate with its Galaxy Note 7, released just as the new iPhone premiered. Samsung discovered a flaw in the lithium-ion battery cell that resulted in fires. Nor have explosions been ruled out. Initially, the phones had to be turned off during flights. Then the phones were banned from airplanes and airports. Samsung was already busy handling recalls and the explosions and fires continued. Samsung was forced to recall 2.5 million phones, a recall that is one of the largest ever in the cell phone industry. Analysts expected the cost to be about \(\$ 1\) billion. \({ }^{42}\).

There have been warnings with Samsung's previous models about installing replacement batteries and not covering the phone, something that can cause overheating of the phone batteries. The problem is that consumers do not always read the warnings, and, for the new model, it was initially unclear what was causing the fires. The batteries were the focus of attempts to determine cause.

Batteries are a typical supply chain item, that is, ordered by Samsung from vendors. However, as more and more battery producers have entered the market, the difficulties of tracking quality controls and production have increased. The parts vendors present a liability issue for manufacturers. That someone else made a part does not relieve the manufacturer of liability. The manufacturer is liable but can recover from the vendor. However, when the manufacturer uses small battery vendors, the recovery is unlikely. Outsourcing is a means of saving costs, but as Samsung's woes illustrate, those savings may be penny-wise and pound-foolish...............

 Discussion Questions
1. Explain the product liability theories in this case using what you read in Reading 8.4, A Primer on Product Liability.
2. Discuss the supply chain liability and why cheaper vendors are used.
3. Discuss the risks of using cheaper vendors.
4. Discuss the ethical issues in using cheaper vendors.