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Samsung Electronics favors SDI batteries in premium Galaxy S8

Analysts say tech giant does not think SDI batteries caused Note 7 fires

SEOUL -- Samsung Electronics is likely to use batteries produced by its affiliate Samsung SDI in its premium Galaxy S8 smartphones, analysts said Wednesday, as those batteries were not thought to have caused its previous Galaxy Note 7 models to explode.

They believe the South Korean technology giant will be ordering batteries from Samsung SDI for its Galaxy S8 and low-cost Galaxy A models because it does not think that the batteries caused its now-terminated Note 7 handsets to catch fire. Samsung released its Galaxy A series on Monday and is expected to launch S8 in the first half of this year.

"Samsung Electronics concluded that the Samsung SDI battery is not the problem behind the Note 7 explosions because handsets with batteries from both SDI and a Chinese maker caught fire," said Daniel Kim, an analyst from Macquarie Research. "It is no wonder that Samsung Electronics decided to use SDI batteries for its next models."

Samsung Electronics changed its battery supplier to Amperex Technology, a China-based unit of Japan's TDK, from Samsung SDI for the Note 7 smartphones after they caught fire last year. But the smartphones with the Amperex batteries also subsequently overheated, leading the company to kill off the long-awaited model in October. Samsung is expected to announce the results of its investigation into the Note 7 debacle later this month.

Lee Seung-woo, an analyst at IBK Securities, said that Samsung Electronics did not have time to change battery suppliers for the new models because it had cooperated with Samsung SDI from the early stages of their development.

"Samsung Electronics and SDI have worked together in design and lining for S8 smartphones. Samsung may add new battery suppliers, such as LG Chem, to their next models," said Lee.

Samsung Electronics declined to comment directly on the matter, saying supplier information was confidential. But the company said it would get its batteries for the S8 model from two or three manufacturers. Samsung Electronics also said that nothing had yet been concluded on its investigation into the Note 7 explosions.

Samsung SDI, too, declined to reveal if it had provided batteries for Galaxy A.

But, shares in Samsung SDI dropped 1.36% to 108,500 won on Wednesday due to worries that China was punishing South Korean battery makers for Seoul's decision last year to deploy a U.S. missile defense system on its soil. Last week, Chinese authorities excluded South Korean electric vehicle battery-makers from its list of subsidiary beneficiaries.

Samsung SDI's shares had been on a roller-coaster ride since the Note 7 scandal broke in August. They hit a nine-month low of 89,300 won on Oct. 26 after touching a year-high of 124,000 won on Aug. 22 pre-crisis.

But since December, those shares have rebounded dramatically, rising 23.2% to 110,000 won on Dec. 20, largely thanks to its deal with U.S. electric carmaker Lucid Motors.

Lucid agreed to use Samsung SDI's lithium-ion batteries in its high-end sports sedan which it plans to release next year. Lucid Chief Technology Officer Peter Rawlinson said that the new electric vehicle will be able to travel 400 miles on a single charge.

Shares in Samsung Electronics slipped 0.88% to 1,808,000 won on Wednesday, after hitting a record-high of 1,824,000 won in the previous close as the company is expected to perform better-than-expected in the fourth quarter thanks to weakness in the won versus the U.S. dollar.

Samsung plans to announce its results for the October-December period on Friday.

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