Prior to halting sales of the Galaxy Note 7 and recalling shipped units, Samsung had sold nearly 2.5 million units of the phone. What will it cost to get all — or most — of these units back in house and then replace them with new units? Well, let’s just say it won’t be cheap. According to estimates compiled by Bloomberg, this recall could cost Samsung as much as $1 billion, an amount Samsung said was “heartbreaking”…
Short term this is a painful hit to profits, but long term it’s damage to Samsung’s reputation that will be hard to deal with. Through Samsung’s efforts to handle this recall, it has been harshly criticized by Consumer Reports for not handling things officially via government resources. Even worse, all of the negative publicity of phones exploding won’t melt away too soon. Many customers have already decided against getting the Note 7 following the recall. However, Samsung’s quick action with this recall should help keep the brand in a good light for the most part.
To help ensure Samsung doesn’t have issues with batteries after replacing devices, the company is reportedly dropping its own Samsung SDI batteries which previously powered nearly 70% of Galaxy Note 7s. This is a safe move for the company seeing that the remaining batteries, supplied by Chinese manufacturer ATL, were exempt from these issues. Samsung is expected to order more batteries from ATL for replacement Note 7 units.
Samsung SDI is also expected to pick up the majority of the cost for battery parts for the recall. That will apparently lead to an operating loss of about $16 million in the third quarter, according to Lee Seung-hyuck, an analyst at Korea Investment & Securities (via Korea Herald).
For the global recall of 2.5 million units, Samsung SDI is expected to bear the expense for most of the battery parts. Together with the possible sales decline of Galaxy Note 7, Samsung SDI’s operating loss may stand at around 18 billion won ($16 million) in the third quarter.
More Galaxy Note 7 coverage:
- Consumer Reports says that Samsung’s Note 7 recall ‘isn’t official’
- Samsung launches Galaxy Note 7 exchange program for US customers, new devices coming as soon as next week
- US carriers respond to the Galaxy Note 7 recall, here’s what you need to know
- Samsung recalls Galaxy Note 7 devices worldwide after fires & explosions, abandons UK launch [Video]
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