Samsung’s Galaxy Note 7 Recall May Cost the Company About $1 billion

Samsung’s Galaxy Note 7 recall due to battery issues may cost the company about $1 billion. In what might be the biggest smartphone recall ever, Samsung has halted sales of some 2.5 million new Galaxy Note 7 smartphones, amid ongoing reports that a flaw in the device’s batteries is making them catch fire and explode.

It looked like an upward climb for Samsung after  the release of its Galaxy Note 7, in August 2016. However, just when things started looking real good, 35 customers reported that the battery of the new Samsung phablet had exploded or caught fire while charging.

Samsung  was quick to take responsibility and recalled about 2.5 million Galaxy Note 7 units released in the market. Sales were also suspended in the United States, of the device, and carriers are offering replacement phones until the problem is sorted out. They also issued an apology for all the inconveniences.

“We acknowledge the inconvenience this may cause in the market but this is to ensure that Samsung continues to deliver the highest quality products to our customers. We are working closely with our partners to ensure the replacement experience is as convenient and efficient as possible,” said Samsung.

This is no small blow for Samsung as it has affected sales as well as its reputation.

“The potential damage to reputation is far greater than short-term financial losses,” says Chang Sea Jin, a professor at the National University of Singapore.

Tthe head of Samsung’s smartphone business, Koh Dong Ji, was asked about the financial impact of the battery issue during a press event and even though Koh Dong Jin did not reveal a figure, but said that it was a “heartbreaking amount.”

Samsung has not confirmed the cost of the recall, but estimates compiled by Bloomberg from Credit Suisse Group AG, Daishin Securities Co., and Pelham Smithers Associates suggest that the battery snafu with the Galaxy Note 7 may have cost the company about $1 billion.

There are also reports  that Samsung SDI supplied about 70 percent of the Galaxy Note 7 batteries while 30 percent were supplied by Amperex Technology Ltd based in China. Both companies are expected to bear the cost of the recall.

The loss might even be greater with  Apple’s launch of the iPhone 7 and the iPhone 7 Plus on Sept. 7. The Plus variant of the iPhone that sports a screen size of 5.5 inches has rivaled previous Galaxy Note models. The launch of the iPhone 7 Plus is expected to give stiff competition to the Galaxy Note 7.

This new development might make the iPhone 7 Plus a more attractive alternative than the Galaxy Note 7 because of the battery problem and also because Samsung has suspended sales of the Phablet.

Samsung has not confirmed when sales of the Galaxy Note 7 will restart. Only time will tell how badly the battery issue of the Galaxy Note 7 has affected the company’s overall smartphone sales.


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