Now that Samsung’s flagship Note7 phone is fully recalled and discontinued due to exploding batteries, two questions remain: Why, exactly, did this happen, and how will this impact Samsung financially?
On Friday, Samsung released an estimate on the latter, saying the it expects a “mid-3 trillion won” impact in operating profit for the fourth quarter of 2016 and the first quarter of 2017.
While mid-3 trillion is not a very precise figure, 3.5 trillion won translates to $3.09 billion, so that’s the number we’ll have to work with for the time being.
This, of course, doesn’t include the impact the Note7 debacle will have on brand loyalty — one estimate claims the total damage might be as high as $17 billion.
Samsung plans to fill the hole by “expanding sales of flagship models such as the Galaxy S7 and Galaxy S7 edge.” That will work for now, but the real test will be the company’s next flagship launch, which is likely to happen in February 2017, when the company is rumored to launch the Galaxy S8.
There’s still no word from Samsung on what had caused the Note7 battery issues beyond its initial explanation that “there was an issue with the battery cell. An overheating of the battery cell occurred when the anode-to-cathode came into contact which is a very rare manufacturing process error.”
To our repeated queries about an updated explanation (since the above one was issued before the second Note7 recall), Samsung told us it is “working with relevant regulatory bodies to investigate the recently reported cases involving the Galaxy Note7.“
Samsung does have some reassuring words for its customers in its latest estimate, though. The company claims it will “focus on enhancing product safety for consumers by making significant changes in its quality assurance processes.”