Sunday 4 December 2016

Samsung Note 7 recall to cost at least 5.3bn dollars

Published 14/10/2016 | 03:16

Samsung said it will make significant changes in its quality assurance processes after the problems with the Note 7 (AP)
Samsung said it will make significant changes in its quality assurance processes after the problems with the Note 7 (AP)

Samsung has said the discontinuation of the Galaxy Note 7 will cost the company about 3 billion dollars (£2.45 billion) during the current and next quarters, bringing the total cost of the recall to at least 5.3 billion dollars (£4.3 billion).

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The discontinuation will cost in the mid-2 trillion won range during the October-December period and another trillion won (£722 million) during the January-March quarter, the company said in a statement.

Samsung had already slashed its third-quarter profit forecast by 2.3 billion dollars (£18 billion) earlier this week, an amount that could wipe out its entire mobile business profit.

That did not include the cost of Samsung's first round of recall, which analysts estimated at between 1 trillion and 2 trillion won (£722 million to £1.4 billion).

Samsung has enough cash and other businesses to absorb the shock from the phone recall. It said it expected to generate 5.2 trillion won (£3.7 billion) in operating income during the third quarter after the recall cost.

Analysts said most of the income will be generated by its businesses in advanced displays and semiconductors.

Samsung added that it will make significant changes in its quality assurance processes.

Due to mysterious fires and overheating problems, more than 2.5 million Galaxy Note 7 smartphones were recalled twice, before the model was discontinued earlier this week two months after its launch in August.

In the US, 1.9 million Note 7 phones were subject to the two recalls. Samsung also recalled about 200,000 in China and about half a million in South Korea.

The US Consumer Product Safety Commission said there were 96 reports of batteries in Note 7 phones overheating in the country, including 23 new reports since the first recall announcement last month.

The company received 13 reports of burns and 47 reports of property damages associated with the phones.

"Consumers should immediately stop using and power down all Galaxy Note 7 devices, including Note 7 devices received as replacements in the previous recall," the agency said.

The botched recall raised questions about Samsung's initial analysis of the Note 7 phone's problems. At first, Samsung said a minor manufacturing error in the batteries was causing the phones to overheat.

The problem with the replacements is still unclear. Experts say Samsung may have rushed to conclude the Note 7's problem was a battery issue and it may take a long time to find the real cause.

The Note 7 device was one of the most expensive smartphones on the market with all the latest technologies from Samsung, including the ability to unlock the phone by scanning a user's iris.

AP

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