A financial analyst at Samsung Securities estimates that recall and customer appeasement plans for the Galaxy Note 7 will cost Samsung Electronics a mere ₩820 billion or $742 million. Credit Suisse, Daishin Securities and Pelham Smithers all say about $1 billion.
Those are numbers thrown around by analysts and relayed through The Korea Herald and Bloomberg. The profit impact could be much more painful — “heartbreaking,” even, according to Samsung.
A $1 billion take would only have up to a 5 percent impact on the chaebol’s annual net income. But with Samsung catching up on free replacement units and the iPhone 7 coming into play later this month, the profit impact may deepen. Samsung Securities is dropping its Note 7 sales estimates for the third quarter to 3 million — that’s out of original estimates of 12-14 million sales for the remainder of the year. And what happens during the holidays, well, we just aren’t sure as of yet.
The Korea Economic Daily reports that seven out of ten Note 7 batteries were made by Samsung SDI while China’s Dongguan Amperex provided the rest. Samsung Electronics has stopped orders from its affiliate group in the wake of this recall while Note 7 sales in China have begun.
One possibility for Samsung to make up the revenue rut is to repurpose the recalled units’ components for other devices or put in new batteries and sell devices to emerging markets as refurbs.
A temporary financial penalty, though, is better than a long-lasting dive in reputation.