Galaxy Note 7 Recall to Cost Samsung $1 Billion

Samsung is set to take a $1 billion hit following its decision to recall its potentially faulty Galaxy Note 7 smartphones after a number of handsets exploded while charging, reports Bloomberg. The news comes as a huge blow to the Korean company, which was on the up following the great success of its flagship Galaxy S7 phone earlier this year.

“Estimates from Credit Suisse Group AG, Daishin Securities Co. and Pelham Smithers Associates put the recall’s cost at around $1 billion or less,” Bloomberg’s Jungah Lee and Yoolim Lee report. “Asked about the financial impact, Koh Dong Jin, the head of Samsung’s smartphone business, said at Friday’s press conference in Seoul that it was a “heartbreaking amount.’”

While the Note 7 fault has hit Samsung hard, especially since the company was eager to exploit the smartphone market before Apple unveils its new iPhone, the financial cost of the recall – and even the $7 billion in value the company lost following the raft of reports of exploding handsets – is a relatively small price to pay to protect Samsung’s customer base and reputation.

“Still, the estimated impact only represents less than 5 percent of Samsung’s projected net income of 23 trillion won ($20.6 billion) this year,” the Bloomberg report added. £And it’s unclear whether part of the cost, if any, will be shouldered by Samsung SDI Co., the company’s affiliated battery manufacturer. While Samsung hasn’t said who supplied the Note 7’s batteries, the battery company will probably also bear some of the cost of the recall. Samsung SDI supplied 70 percent of the batteries to Samsung Electronics, which stopped ordering them, while Chinese battery maker Amperex Technology Ltd. provided 30 percent, the Korea Economic Daily reported.”