Samsung takes £4.4bn hit from Note 7

• Posted on October 14, 2016
• by Nana Kwesi Coomson
• Comment

The total cost of pulling Galaxy Note 7 smartphones off the market will be at least £4.4bn ($5.4bn), Samsung said.

The South Korean tech giant had already lowered its third quarter-profit guidance by £1.9bn ($2.3bn).

On Friday, it said it expected an additional hit of about 3.5 trillion won ($3bn, £2.5bn).

The Note 7 was recalled last month after battery fires, but when replacement phones experienced the same problem, Samsung scrapped the device.

The premium phone, launched in August, was meant to compete with Apple’s new iPhone 7 at the top of the smartphone market.

Despite the setback, Samsung Electronics still expects to make 5.2 trillion won (£3.7bn) in operating profit during the third quarter after the recall cost.

‘Enhance product safety’

The firm said that in order to “normalise its mobile business”, it would expand sales of its other flagship devices, such as the Galaxy S7 and S7 Edge.

“Additionally, the company will focus on enhancing product safety for consumers by making significant changes in its quality assurance processes,” Samsung said.

In September, the company recalled about 2.5 million Note 7 devices after complaints of overheating and exploding batteries.

It later insisted that all replaced devices were safe. However, that was followed by reports that those phones were catching fire too.

On Tuesday, the company said it would permanently cease production of the device and urged owners to turn it off.

-BBC