Published in Mobiles

Samsung Galaxy Note 7 recall could cost $1 billion

by on05 September 2016

2.5 million phones being returned

The Samsung Galaxy Note 7 recall sounds like one of the biggest in the last few years and it looks like the company has to recover as many as 2.5 million phones from its customers. This is likely to cost Samsung close to a billion dollars and it will eat up any potential profits it was making from these phones. 

Fudzilla reported about the Galaxy S7 catching fire, and unfortunately this was not an isolated case, it happened over and over again, to at least 35 people. 

Bloomberg reported that about three dozen of the devices were found to have batteries that ignited and exploded. This is a lot of phones and initiated the biggest recall in Samsung’s recent history.

Credit Suisse estimates that Samsung Electronics gets about $600 revenue and $108 of operating profit for every Note 7 it sells. Of course, after the recall, this money will be burned  up by shipping and replacement costs. Doing a quick sum and assuming that the 2.5 million Note 7 number is close to the real number, Samsung will directly lose most of the $272.5 million profit that it gained from the sales of these devices.

The worst part is that after an excellent run with the super popular  Galaxy S7 phones, Samsung is damaging its reputation, and this happens just days before Apple releases the iPhone 7.

Samsung  said that it will replace your Note 7 with either another Note 7 or alternatively with Galaxy S7 or S7 edge, and it will refund the difference. Most of the sales affect  USA and Canadian customers while the sales were halted in most European countries before the devices started shipping on September 2.

For  the US customers it is not clear when they will get a replacement Note 7 if they still want to use that device. It might take days or weeks  and some carriers will give customers a comparable device in the meantime, and some,  it's been reported, even waived  a restocking fee for their customers.

It is crystal clear that the damage to the brand and reputation is something that will cost more than money and it will make people think twice before they buy another Samsung mobile phone in the future. This will be hard to fix, but Samsung is doing the best it can to repair its damaged phones, brand and reputation. 

Last modified on 05 September 2016
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