Time to pay the piper: Samsung SDI prepares to pay up for Note 7 batteries

Samsung has lost quite a lot of money because of the Galaxy Note 7. The recall of the exploding smartphone took billions of dollars out of the company’s pocket. Faulty batteries were to blame for the fiasco, which is why the tech giant expects compensation from both Samsung SDI as well as China’s ATL, the two companies who supplied the defective batteries.

Even though Samsung SDI now has Samsung Electronics knocking at the door, things aren’t going to plan. According to a report from The Investor, Samsung SDI and Samsung have not yet been able to come to an agreement. The battery maker has apparently been asking for a reduction in compensation, mainly due to significant financial problems.

Last year, Samsung SDI suffered an operating loss of 926.3 billion won ($826.90 million), both because of the Galaxy Note 7 and lower than expected sales of automotive batteries, especially in China. Nothing is official yet, but Samsung will reportedly agree to the request of its sister company. Nevertheless, Samsung SDI has reportedly already put aside more than 95 billion won ($85 million) for the compensation payout.

Even though Samsung SDI supplied 70 percent of the faulty batteries to the smartphone maker, the two companies will obviously still work together. Batteries for the upcoming Galaxy S8 and S8+ will be supplied by Samsung SDI. ATL, on the other hand, won’t be doing a lot of business with Samsung in the future. It is rumored that the company has chosen Japan’s Murata Manufacturing as a secondary battery supplier.

In other Samsung SDI-related news, the company has decided to drop its plans to add new production lines at its battery plant in Xian, China. The main reason for the decision is not at all related to the company’s current predicament though. Instead, the halt is due to Samsung SDI being exempted from the government’s subsidies for electric cars, supposedly as retaliation for South Korea’s deployment of the U.S.-built THAAD missile system.

What this means is that EVs powered by Samsung SDI batteries aren’t entitled to government incentives that lower the car’s price quite a bit. Because of this, Samsung SDI has a lot of inventory it currently can’t sell and its production lines in China have been almost idle for months. The plan of investing $600 million to install additional battery manufacturing lines at the plant by 2020 has, therefore, been canceled.