Samsung Note 7 recall to cost at least $5.3 bn

Seoul, October 14 

Samsung Electronics said today that discontinuing the Galaxy Note 7 smartphone, which is prone to overheat and catch fire, will cost it about $3 billion in the current and coming quarters, raising total costs from the recalls to at least $5.3 billion.

The Note 7 discontinuation will cost in the mid-2 trillion won range during the October-December period and another 1 trillion won ($884 million) during the January-March quarter, the company said.

Samsung already slashed its third-quarter profit forecast by $2.6 billion earlier this week, an amount that could wipe out its entire mobile business profit. That did not include the cost of Samsung's first recall, which analysts estimated at 1 trillion won to 2 trillion won.

Samsung has enough cash and other businesses to absorb the shock from the phone recall. It said it expected to generate 5.2 trillion won ($4.6 billion) in operating income during the third quarter after the recall cost. Analysts said most of the income will be generated by sales of advanced displays and semiconductors.

Samsung added that it will make significant changes in its quality assurance processes to improve product safety. It did not elaborate.

The company said it will expand sales of two other smartphones released in spring, the Galaxy S7 and Galaxy S7 Edge, quashing rumours that it may try to release updated versions of those devices.

More than 2.5 million Galaxy Note 7 smartphones were recalled due to the unexplained overheating problems before Samsung gave up the product earlier this week, just two months after its launch in August. — AP