The short version is that when overheating was first observed all the devices were using battery “A” and no fires had occured with battery “B” from an alternate supplier. Samsung felt confident in replacing battery A units with those using battery B.
But the battery B maker had to dramatically ramp up production and that stretched its quality assurance regimens so much that the new batteries — let’s call them battery “C” — developed faults, even more so than the original battery A.
Samsung apologised to its customers, resellers, carriers, and all involved. D.J. Koh, president of Mobile Communications Business, Samsung Electronics, said (paraphrased from Korean), “We asked battery makers to provide a 3500mAh battery in a more compact form to meet the needs of consumers for increased multimedia use and thinner, lighter devices. We take full responsibility.”
The report outlined Samsung’s own testing — extreme abuse and misuse — of more than 200,000 fully assembled, randomly chosen Note7s and 30,000 batteries from batteries A, B (good), and C. Samsung dedicated more than 700 engineers and researchers and carried out large-scale testing in its Vietnam assembly facility. The aim was to replicate what had happened “in-the-field”.
Concurrently, three independent testing companies UL, Exponent and TUV Rheinland conducted their own investigations into various aspects of the device from battery, design, manufacturing, to logistics. Without fail each concluded that the Note7 battery, not the design of the phone which exceeded recognised specifications, or anything else, was at fault.
A more detailed analysis of the findings plus what Samsung is doing to ensure it never happens again is here.