Samsung has warned that the total cost of pulling its Galaxy Note7 smartphones off the market will be at least £4.4 billion.
Samsung Electronics on Wednesday slashed its latest quarterly profit estimate by one third in the wake of a highly damaging recall crisis that ended with the scrapping of its latest flagship smartphone.
Industry analysts have suggested the Note 7 fiasco could end up costing Samsung anywhere between US$10 billion and US$20 billion, with a lot of the losses tied up with the harder-to-calculate damage done to brand reputation.
To make up for the lost revenue, Samsung said it would expand sales of gadgets like the Galaxy S7 and S7 edge phones, and make "significant changes" in its quality assurance processes to improve product safety.
"Samsung's other divisions, such as semiconductors, displays and consumer electronics, continue to record robust operating performance", Fitch said. Samsung usually releases a new iteration of the Galaxy S series in spring, so the company may have to provide a strong incentive to sell the 6-month-old phones, such as lowering their prices.
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When replacement phones also started to combust, the company eventually made a decision to scrap the Note 7 line entirely.
The Note7 debacle has come at an awkward time for South Korea's biggest family-run conglomerate, which is in the middle of a leadership succession and is facing calls for a major restructuring from United States hedge fund Elliott Management.
"Consumers should immediately stop using and power down all Galaxy Note 7 devices, including Note 7 devices received as replacements in the previous recall", the agency said.
Numerous analysts have suggested that the rush to release the Note 7 ahead of the iPhone 7 left Samsung's engineers little time to test the device's new built-in battery.
The problem with the replacements is still unclear. Experts say Samsung may have rushed to conclude the Note 7's problem was a battery issue and it may take a long time to find the real cause. And that's why, as part of this announcement, Samsung is offering some hefty incentives for customers who return the Galaxy Note 7. It was sold for between $850 and $890.