Samsung Galaxy Note 7 recall projected to cost $1 billion



According to estimates compiled by Bloomberg analysts, Samsung may spend as much as $1 billion to replace all of the 2.5 million Note 7 it shipped in the two weeks that the handset's been on sale. 1 in 24 devices of so is possibly carrying a deffective battery unit that's prone to catching fire and exploding while charging.

Still, the potential financial damage to the company represents less than 5% of its projected net income of $20.6 billion for 2016. Some of it might be picked up by Samsung SDI, which supplied 70% of the batteries to Samsung Electronics. It has now stopped ordering them.

Unfortunately, the recall has ruined the timing advantage that the Galaxy Note 7 had over the upcoming iPhone 7. Although the Note 7 garnered favorable reviews and benefited from Samsung's strong-arm marketing, its early sales were reinforced by the absence of new iPhones. But now, Samsung has halted sales of the phablet in 10 main markets and the Note 7's reputation has been tarnished.

IDC Singapore analyst Bryan Ma predicts Samsung will take a sales hit this quarter, but doesn't foresee a long-term impact if the company manages to turn the situation around quickly enough. So far, Samsung has been quick to respond with the recall, although the Note 7's defects will inevitably leave a red mark in what has otherwise been a stellar year for the company's image and financial well-being.

source: Bloomberg

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17 Comments

1. Podrick

Posts: 1285; Member since: Aug 19, 2015

I miss the guy saying "No one makes money with Android"

2. Tom5521

Posts: 41; Member since: Sep 04, 2016

well it's true

4. NoToFanboys

Posts: 3231; Member since: Oct 03, 2015

Let me guess, a banned troll from the past?

9. tedkord

Posts: 17453; Member since: Jun 17, 2009

A jealous window licker. Samsung will still turn a healthy profit, the Note will continue to be rated at the top, and he'll continue crying about it.

10. GreenMan

Posts: 2698; Member since: Nov 09, 2015

One Billion Dollars...? Ouch! Yikes!! Zoinks!!! That's a LARGE sum of money... Even Apple hasn't faced such a HUGE penalty, if my memory serves me right... Funny cause Samsung Flagships are usually build like an ox... And yet THE LATEST AND GREATEST ULTRA FLAGSHIP is plaqued with a problem that often found in budget class smartphones... Heck, even budget phones rarely explode...! Even The cheap Chinese ones with an unknown brand...! Now, THIS is embarrassing...!!! While at the same time quite unfortunate... Anyhow, "poop" happens! And it can happen to ANYONE... So please, don't rejoice on the loss of Samsung and Note 7 consumers who payed as much as $800 for such a beautiful and powerful piece of hardware... S'Day! (Samsung Day!)

33. lyndon420

Posts: 6863; Member since: Jul 11, 2012

Really? He was such a one liner...got very boring after awhile.

3. Creep

Posts: 193; Member since: Apr 05, 2016

Holy Sh1t!

24. TerryTerius unregistered

I am extremely curious to see what happens after this is over with. If, and that's a big if; by the middle of next year Samsung is still steamrolling their android competitors in terms of sales, I really want to see what the comments will be like and what reasons will be thrown around to explain it. If nothing else, Samsung has likely done Apple a massive favor for this fall. They may have inadvertently significantly reduced the potential competitive pressure they would have been applying to Apple, and may have lost the momentum they started gaining with the S7 and S7 edge. Frankly that is a shame, because that doesn't really do any of us any good. That aside, I don't think that LG, Sony, HTC, Lenovo/Motorola and the others will gain a whole lot of breathing room or traction from this. They will inevitably release some ads and social media posts poking fun at Samsung, and it most likely isn't going to do much of anything to change their relative fortunes. They will get a bunch of retweets and some articles written on tech websites, but I'm betting it will be a short-term thing. We've seen various companies use those tactics over the years, and it almost never converts bad news for a competitor into a sales bump for them.

50. Bankz

Posts: 2550; Member since: Apr 08, 2016

Its good to see you always support anything samsung does whether good or bad. I've noticed it for some time now yet we hardly see you do that for other oems. (This is with you being my favourite poster on here) but its true regardless. Btw, regardless what happens, samsung will always out sell every other company even if all the samsung phone gets blown up to pieces. So, them outselling anyone next year wouldn't be news and wouldn't justify anything tbh.. As for the iphone, samsung didn't do them any favors too. We all know that the iphones would have annihilated the note7 and s series put together either ways, regardless of blown up phones or not, even in their most boring release period and samsungs peak periods.

51. TerryTerius unregistered

Not really. I've heavily criticized Apple for their hypocrisy/glory stealing, my frustrations with iOS, and their aversion to innovative risk multiple times. I am writing this comment on an iPad Pro and use an iPhone 6S+ for work. I've criticized Samsung in the past for keyboard lag on the S6 as well as quality control issues (I had to swap units multiple times for one reason or another), and I've often expressed my displeasure with their failure to addressing nagging issues they've had with their software for *years*, and I have an S7 Edge. Same story when I had my HTC one M8, S3 (lag city), G3, or Lumia 920. I've talked about all the MANY things that went wrong with those phones despite how much I loved them. On balance I may spend more time talking about the positive traits of any given company, but I have no issue laying critique where I see it's needed. Hell, that is what it means to actually support a company. I only buy whatever I feel the best products are for me, and I don't have loyalty to any particular brands. That means I have to be honest about the upsides and shortcomings alike. Same reason I didn't defend the lag that is present on the note 7. Oh don't get me wrong, I wasn't saying that I expected Samsung to outsell Apple. What I was saying is that Apple is for the first time in many years wobbling and facing some vulnerability in the market, at the same time that Samsung was doing nearly everything right with their latest products. It isn't really clear if Apple's recent slide in sales is connected to Samsung's surge, but they were still putting pressure on Apple in terms of design, feature set, expectations, and performance in some categories. This may cripple that push Samsung started last year. That is what I was referring to

27. DonChoi

Posts: 35; Member since: Oct 21, 2014

However, Securities estimates that Samsung would still get more operation profit margin than 45$ billion in 3Q.

34. Plasticsh1t

Posts: 3109; Member since: Sep 01, 2014

PA please change the rating for the note 7 as it is clearly doesn't deserve your high rating.

35. Myphoneisonfire

Posts: 403; Member since: Sep 05, 2016

A billion is peanuts for sammy , theyll make up for this loss by increasing the cost of the next iPhone as most parts for the iPhone are made by Samsung anyway !!

39. ChickenDinner

Posts: 30; Member since: Feb 14, 2016

1 billion dollars is actually a lot of money for any company. Yes, Samsung will be fine but let's just be clear that a billion dollar expense is not pocket change. Also, Samsung would never increase the cost of iPhone parts to make up for this loss. Don't forget Apple and Samsung are business partners.

48. TerryTerius unregistered

That kind of depends. For a company like Apple for example, $1 billion is less than a percent of their total cash reserves. It's not nothing, but it wouldn't be enough to cause them any worry at all. While Samsung made about 7 billion in profit last quarter, I'm fairly certain their coffers are deep enough for them to eat a billion dollar hit without it really doing too much to their operational abilities. That isn't really the issue for them, the danger is how this affects their future sales.

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