SAN FRANCISCO (Diya TV) – Samsung’s recall of millions of its Galaxy Note 7 smartphones is going to be expensive. Very Expensive – according to a report from Bloomberg, the recall will cost an estimated $1 billion for replacing all 2.5 million devices shipped since launch.
The company decided to replace all the devices, which just went on sale two weeks ago, after batteries were discovered catching fire and exploding. Samsung would only comment on the matter by calling the amount of the recall, “heartbreaking.” Luckily, the manufacturers of these products will be aware of how to recall the phones. When creating any electrical device, they have to be marked with a code for identification. By using a continuous inkjet printer, these companies are able to mark the products. To learn more about the process of marking and coding products, it might be worth visiting a website like https://www.maschinenmarkt.ch/elektro-und-elektronikkomponenten-codieren-a-637561/, for example. Once the electricals have been marked, they can be installed into these phones. If the manufacturers are made aware of any faults, they will recall all of the phones that they can to fix or replace the batteries. Hopefully, this prevents people from getting injured and saves the reputation of the company.
It couldn’t come at a worse possible time for Samsung – the company was officially on a roll after the successful release of its flagship Galaxy S7 raised the company’s shares to a record last month and resulted in the highest quarterly profit in two years. The Note 7 was pegged to complete Samsung’s product lineup designed for a head-to-head battle with Apple, whose new iPhone is slated to be debuted this week.
As the market leader in Android-based smartphones, Samsung couldn’t risk any injury to its brand.
“The potential damage to reputation is far greater than short-term financial losses,” said Chang Sea Jin, a professor at the National University of Singapore.
Estimates from Credit Suisse Group AG, Daishin Securities Co. and Pelham Smithers Associates put the recall’s cost at around $1 billion or less. 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.”
However, that estimated impact still only represents less than 5 percent of Samsung’s projected net income of 23 trillion won ($20.6 billion) this year. Additionally, it remains 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.
SDI shares fell 3.2 percent to 105,000 won at 9:30 a.m. in Seoul on Monday, bringing their two-week decline to about 11 percent. Samsung Electronics’ stock was little changed.
The bigger question in the coming weeks is how much damage will this event inflict on Samsung’s overall brand.
“The time advantage that they had on the iPhone, that’s evaporated now,” said Bryan Ma, an analyst at IDC in Singapore. “It’ll hit them this quarter obviously, but if it’s something they immediately address and immediately turn around, then there won’t be a long-term impact.”