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Samsung Note 7 Recall Will Cost at Least $5.3 Billion


According to ABC News, Samsung Electronics announced that the discontinuation of the Galaxy Note 7 would cost the company about $3 billion during the current and upcoming quarters, which brings the total cost to $5.3 billion.

Details about the Discontinuation Cost

The company stated that the Note 7 discontinuation will cost in the mid-2 trillion won (roughly $2 billion) range during the October-December period and another 1 trillion won ($884 million) during the January-March quarter.

Samsung cut its third-quarter profit forecast by $2.6 billion earlier this week, which is enough to wipe out its entire mobile business profit. This does not include the cost of Samsung’s first recall, which is estimated to be 1 trillion won to 2 trillion won.

Samsung has enough cash and other businesses to absorb the shock from the recall. It is expected to generate 5.2 trillion won in operating income during the third quarter after the recall cost. Most of the income will be generated by sales of advanced displays and semiconductors.

New Quality Assurance Process Under Consideration

Samsung implied that it will make important changes in its quality assurance processes to enhance product safety for consumers. The company also mentioned that it will expand sales of two other smartphones that were released in the spring, the Galaxy S7 and Galaxy S7 Edge. Samsung usually releases a new iteration of the Galaxy S series in the spring, so the company may have to give a strong incentive to sell a 6-month-old phone, such as lowering the prices.

Because of fires and overheating, more than 2.5 million Galaxy Note 7 smartphones have been recalled before the product was discontinued earlier this week only two months after its launch in August.

In the U.S. alone, 1.9 million Note 7 phones are subject to the two recalls. In China, there were 200,000 phones recalled, and in South Korea about half a million phone were recalled.

Newly 100 Note 7 Incidents Reported to CPSC

According to the U.S. Consumer Product Safety Commission (CPSC), there were 96 reports of batteries in Note 7 phones overheating, including 23 new reports since the first recall announcement last month. The company had received 13 reports of burns and 47 reports of property damage from the phones.

It is recommended by the agency that consumers immediately stop using and power down all Galaxy Note 7 phones, including the replacements in the previous recall.

Samsung said a minor manufacturing error in the batteries for the Note 7 is what was causing the phones to overheat, but the problem with the replacements is still unknown. Experts believe that Samsung rushed to find the Note 7 problem, and it may take a long time to find the real problem.

The Note 7 device was one of the most expensive smartphones in the market. It was sold for between $850 and $890. Samsung is giving a $100 credit to Note 7 owners who switch to another Samsung phone.

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