Samsung has revealed it is going to take an initial two billion euro hit from scrapping the Galaxy Note 7 smartphone.
ADVERTISEMENTSamsung’s shares have fallen further, and those of its rivals’ rose, after the South Korean firm revealed it is going to take an initial 2.6 trillion won (2.09 billion euros) hit from scrapping the Galaxy Note 7 smartphone.
That is the amount it has reduced its profit estimate by for the current quarter, which is not as much as some investors had feared.
As the posters advertising the phone were taken down from showrooms and the handsets removed, the final cost remains unknown.
Industry watchers said the longer term impact on Samsung’s reputation and its earnings from the burning battery problem could be the most expensive technology product safety failure ever.
“Damage control at Samsung will face an uphill battle to redeem the company’s tarnished image owing to the dangerous and dramatic nature of the phone’s failure,” Vijay Michalik, an analyst at research firm Frost & Sullivan, said.
Samsung slashes profit estimate by a third https://t.co/P6YcFiRTxw
— Financial Times (@FinancialTimes) October 12, 2016
Rivals gain as overheating cause unknown
Mystery also surrounds the cause of the overheating in the phones which have had their batteries replaced following a recall of 2.5 million of them.
An official at the Korean Agency for Technology and Standards, which is investigating the problem alongside Samsung, said the fault in the replacement devices might not be the same as the problem in the original product. The official asked not to be identified as he was not authorised to speak publicly.
Tom Kang, Research Director at Counterpoint Technology Market Research, speculated the design could be the problem, with Samsung trying to cram too much into the device: “I think the problem with the Note 7 was that they applied the curved glass on the note device for the first time and then they have a waterproof function, so that leaves very little space inside of the device. So it becomes tricky for the battery manufacture and for Samsung to fit in all the components and at the same time making it waterproof, is making it more air tight so the heat is going to be a problem.”
Rival suppliers of smartphones that use the same operating system as Samsung – Android – stand to benefit.
Apple – the maker of the iPhone – saw its shares rise in New York. Others that could pick up sales are Android manufacturers such as Google, LG Electronics and Huawei.
Here's how much Apple stands to profit from Samsung's exploding phone disaster: https://t.co/BomVhWZ1aU
— MarketWatch (@MarketWatch) October 12, 2016
Recall blocked
Britons face problems returning recalled Note 7 smartphones as Royal Mail, the operator of Britain’s main postal service, has banned delivery through its network for safety reasons.
Royal Mail said the ban also applied to its Parcelforce UK and international courier service.
The company said it would ask customers to detail the contents of their packages to ensure that hazardous items such as faulty lithium batteries were not transported.
