Samsung is currently under heavy scrutiny due to the failure of its newly released Galaxy Note 7 due to serious battery problems that cause the device to burn up during use. Reports have now circulated that Samsung will drop the batteries used in the Note 7. Thus, Samsung SDI, Samsung's battery supplier and sister company, will no longer manufacture batteries for Samsung's premier devices.

Samsung SDI is responsible for supplying 70 per ent of the batteries that are used in more than the 2.5 million Galaxy Note 7 units that are out in the market today. On the other hand, 30 per cent of the batteries of the Galaxy Note 7 are supplied by ATL, a Chinese battery maker.

The Relationship of Samsung and Samsung SDI

Now, this will result to severing the bonds of Samsung with Samsung SDI and instead dwell on future investments on ATL. If supplies will still fall short, then another option is for Samsung to consider negotiations with LG Chem to mend the possible shortage of battery supplies for the recalled Galaxy Note 7, knowing that that flagship phablet has been recalled.

Based on Samsung's statements, the reported Galaxy Note 7 explosion and burning instances are due to the defective batteries inside them. With this, Samsung admitted to the public of its shortcomings with regards to securing a proper battery for its phablet flagship.

The relation of Samsung SDI with supplying batteries to Samsung which started on the last quarter of 2014 is due to efforts being made to improve profitability, knowing that Samsung SDI is a sister company to Samsung. Also, the Galaxy Note 7 is the first Samsung phone to rely extensively on the Samsung SDI batteries.

What this Means for Samsung

With this, Samsung SDI will lose an estimate of $16 million of revenue due to the defective batteries. On the other hand, Samsung is experiencing massive losses as it could possibly inflate to a loss of $1 billion, due to the potentially slower sales of the Galaxy Note 7.