Samsung Electronics Co Ltd has recalls all Galaxy Note 7 smartphones equipped with batteries it has found to be fire-prone and halted their sales in 10 markets. (Photo : Getty Images/ Jung Yeon-Je)
Samsung Electronics could undergo a huge loss following the company's comprehensive recall of all Note 7 devices shipped to date, an estimated total cost of around $1 billion might be incurred for replacing all 2.5 million devices shipped since launch. The recall of Galaxy Note 7 was as a result of reports that some handsets were randomly bursting into flames while on charge. It was later discovered that a faulty battery was to blame for the explosions.
Samsung Galaxy Note 7 which was released on Sept. 2 came with a price of $650 and a processing power of Octacore Exynos 8890. The latest phone from Samsung with a display of 5.7 in QHD had a storage capacity of 64GB and 4GB memory.
According to TechCrunch, the company made the voluntary recall of the Note 7 last week after investigating variety of reports of exploding batteries in a small number of devices. The recall was instituted quickly, with Samsung looking to do as much as possible to stop the potential impact on its brand reputation resulting from the error.
This placed Samsung in a rather tricky situation of either replacing all 2.5 million units that had already been produced - including unsold stock - or simply recollecting them and issue owners a full refund. The firm decided to leave it up to customers to choose which option they'd prefer, Next Web reported.
The costs associated with this exercise are seen astronomical despite the company not specifying the exact amount the recall will set it back. Dongjin Koh, President of Mobile at Samsung Electronics, however, did say that it is a "heartbreaking amount."
Koh's secrect remarks have not stopped the market's leading analysts from doing the math and presenting the numbers on Samsung's behalf.
It is reported that the South Korean company will experience a $1 billion hit as a result of the recall. This figure represents only the amount of money that Samsung could lose as the company recollects, repair and redistribute the devices. The figure does not consider the decline in profit that it may hit Samsung from customers who request a refund and end up taking their business elsewhere.
With the information, if a recent report by Korean Herald that cites several industry insiders is anything to go by, the amount of Galaxy Note 7 owners who opted for a refund instead of a replacement is small. However, if more customers decided to switch to a competitor, Samsung's business could be catastrophic.
The Samsung Galaxy Note 7 intensive recall happens just hours after one of the devices exploded in an Australian hotel on a man's hand causing $1870 damage. The man says his Samsung Galaxy Note7 Smartphone exploded during his business trip while he was asleep in his hotel room on Monday.
"My new Note 7 exploded this morning while I was still asleep, it was plugged in and charging," the man, known as Crushader, said.
The explosion is allegedly to have caused more than A$1800 (NZ$1870) damage to the room - a cost the telecommunications giant had agreed to cover, the man wrote online.
"It's the first time they saw such a thing," he said. Adding that he have been given a loan device J1, and he have been promised that the firm will take care of the hotel damages bill.
Here is a video of Samsung's safety recall for Galaxy Note 7:
