After all the negativities that has surrounded the Galaxy Note 7 in the last couple of weeks, Samsung Electronics said Friday that the discontinuation of the Galaxy Note 7 would cost the company about $3 billion during the current and next quarters, bringing the total cost of the recall to at least $5.3 billion.
This sad news can make anybody want to shed tears. The Note 7 discontinuation will cost in the mid-2 trillion won range during the October-December period and another 1 trillion won ($884 million) during the January-March quarter, the company said in a statement.
Samsung already slashed its third-quarter profit forecast by $2.6 billion earlier in the week, an amount that could wipe out its entire mobile business profit. Big time! That did not include the cost of Samsung’s first recall, which analysts estimated at 1 trillion won to 2 trillion won.
Well, it’s a good thing that 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 ($4.6 billion) in operating income during the third quarter after the recallcost. Analysts said most of the income will be generated by sales of advanced displays and semiconductors.
Samsung informed it’s users that it will make significant changes in its quality assurance processes to enhance product safety for consumers. However,It did not elaborate how it intends to do this.
The company said it will expand sales of two other smartphones released in spring, the Galaxy S7 and Galaxy S7 Edge, quashing rumors that it may try to release updated versions of those devices. Samsung usually releases a new iteration of the Galaxy S series in spring, so the company may have to provide a strong incentive to sell the 6-month-old phones, such as lowering their prices.
In the United States, 1.9 million Note 7 phones are subject to the two recalls. Samsung also recalled about 200,000 phones in China and about half a million phones in South Korea. And it goes on & on. Making it look like it may never stop
“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 exact problem with the replacements is still very much 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.
And in a bid to retain customers, Samsung is giving an incentive of a $100 credit to Note 7 owners who switch to another Samsung phone.