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Samsung Loses $22bn Over Note7 Smartphone Recall

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Samsung has lost over $22 billion in market capitalisation since Friday last week  as it recalled its Note7 smartphone sold around the world following reports of the phones catching fire and exploding due to defective batteries.

With an estimated 2.5 million Galaxy Note 7 units sold, analysts say the recall could cost Samsung as much as $5 billion in revenue. The smartphone was launched on 19 August.  The company lost the amount as its share price tanked 11 per cent since Friday – the largest two-day decline in eight years, according to Bloomberg.

Yesterday, Samsung Electronics’ shares fell to their lowest level in nearly two months after the tech giant told customers to switch off and return their new Galaxy Note 7.  Analysts said the recall could torpedo Galaxy Note 7 sales and have a lasting impact on the $211 billion company’s brand image.

According to Fortune.com, investors had wiped $14.3 billion off the South Korean firm’s market capitalization as of 03:03 GMT Monday, as a series of warnings from regulators and airlines around the world raised fears for the future of the flagship device.

Samsung had advised consumers to stop using its Galaxy Note 7 and “immediately participate” in a replacement programme. The call came after the US Consumer Product Safety Commission recommended on last Friday that consumers stop using the smartphone and major airlines globally banned use during flights.

Samsung issued a recall for Galaxy Note 7 smartphone in early September in 10 markets, including the US and South Korea. Defective batteries, which caught fire during charging and normal use, were apparently manufactured by Samsung SDI. Batteries made by its other supplier, Amperex Technology, have not faced the same issues.

Samsung said it is now only using batteries made by Amperex for the Galaxy Note 7 and has ordered an additional four million as replacements. The Chinese firm, which also supplies batteries for Apple’s iPhones, is now the sole battery suppler for the Note 7.

Samsung issued a statement for the Hong Kong and Macau markets, outlining that “we wish to re-emphasise that Galaxy Note 7s purchased in Hong Kong and Macau from authorised resellers on or after 2 September are not affected by the issue as those batteries are provided by a different supplier”.

Samsung’s battery unit previously supplied about 70 per cent of the batteries for Note 7. The world’s largest smartphone maker reportedly was looking for a third battery supplier but hasn’t found one. As demand for the iPhone 7 models takes off, Samsung could face a supply crunch.

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