Samsung warns of $5.3bn blow to profits from Galaxy Note 7 disaster

A customer uses his Samsung Electronics' Galaxy Note 7 as he waits for an exchange at company's headquarters in Seoul, South Korea, October 13, 2016. REUTERS/Kim Hong-Ji

Samsung says it expects to take a $3 billion hit to its profits over the next two quarters in the outfall over its fire-prone Galaxy Note 7 smartphone. The electronics giant's announcement on Friday brings to about $5.3 billion the total losses it is expecting after withdrawing the phone from sale. To make up for the lost revenue, Samsung said it would expand sales of gadgets such as the Galaxy S7 and S7 edge phones. it also pledged to make "significant changes" in its quality assurance processes to improve product safety.

The end of the premium model will damage Samsung's brand, and hurt demand for its other models. It is difficult to measure such impact.

Kim Sung-soo, fund manager at LS Asset Management

Samsung has been braced for trouble after reports that its flagship phone could burst into flames. More than 2.5 million Galaxy Note 7 smartphones were recalled before the product was discontinued earlier this week just two months after its launch in August. Despite the blow to its earnings, the company is big enough to absorb the loss as it reeled in $7.2 billion profits in the second quarter, with mobile profits - its biggest earner - soaring 57%. However, analysts fear the recall may have done irreparable damage to the brand and its other products may not be able to plug the gap.

Samsung must announce clearly what the reason was and dispel uncertainty.

Park Jung-hoon, fund manager at HDC Asset Management
Summarized by



Stay with us, please

Samsung is giving an incentive of a $100 credit to Note 7 owners who switch to another Samsung phone. However, the Note 7 device was one of the most expensive smartphones in the market, selling for between $850 and $890.

Samsung Electronics

Samsung Electronics Co., Ltd. is a South Korean multinational electronics company headquartered in Suwon, South Korea. Through extremely complicated ownership structure with some circular ownership it is the flagship division of the Samsung Group, accounting for 70% of the group's revenue in 2012.

Topic in-depth

Could this be the end of Samsungs smartphone reign?

Samsung is on the ropes. It pains me to say it but the Note 7 fiasco is probably going to hurt them more deeply than they’ll admit and I suspect we’ll see two or three quarters of slow growth thanks to Explode-gate.
Tech Crunch

Topic in-depth

How Samsung Can Repair Its Reputation With Consumers

Bad news can make for the best memes. In recent weeks, various internet users have compared Samsung’s fire-prone Note7 smartphone to a hand grenade, pretended it was a bomb in need of disposal, and placed it in an ice bucket.
ABC News

Topic in-depth

Samsung or Trump: Which brand is in bigger trouble?

When the mighty fall, they don't always know how to react. After all, they're mighty. Falling is for lesser sorts.