The Galaxy Note 7 recall might cut Samsung's profit by $740 million
Since this isn't just damaging the company's image, many analysts were fast to offer their predictions regarding the costs of such a major recall.
Hwang Min-sung, an analyst at Samsung Securities, offered his view on the cost of the Galaxy Note 7's recall and said he expects Samsung to pay $108.5 million, which includes the replacement process.
This is the amount that Samsung will have to pay to recall and replace all the Galaxy Note 7 phablets that have already been shipped to customers and retailers. However, the spending doesn't stop here since most of the Galaxy Note 7 devices that will be produced in September will be used for the replacement program.
Basically, this means that the Galaxy Note 7 will sell less than previously predicted, so Samsung might end up with just 3 million units sold from 6 million units estimated for Q3 2016.
Due to the manufacture of the replacement units and less sales, Samsung's operating profit could be cut by approximately $360 million. Also, in Q4 2016, the recall program is estimated to cost around $270 million, said the analyst.
According to Hwang, “the recall is a negative factor in the short term but will surely be a wise decision because other alternative measures are unlikely to help Samsung regain confidence from consumers and investors.”
So, to sum it up, Samsung's operating profit might be cut by around $740 million by the end of this year, if we are to believe the numbers estimated by Samsung Securities' analyst.