Samsung is currently in the process of recalling the Galaxy Note 7 after the South Korean company confirmed that it came with a faulty battery which causes it to explode. Now, it looks like Samsung will be spending around $1 billion in the process.
Samsung has already shipped around 2.5 million Galaxy Note 7 units to retailers and customers. This past Friday, the company announced that it would be halting the sale of the handset and will open a recall and replacement program for its customers and retail partners. Replacing 2.5 million Galaxy Note 7 units is estimated to cost around $1 billion, according to BGR.
Samsung didn’t confirm the estimated amount, but the head of the company’s mobile business Koh Dong Jin did say that the amount was “heartbreaking,” according to Bloomberg. As of this writing, there has been 35 confirmed cases worldwide wherein the Galaxy Note 7 exploded.
Although Samsung is looking at a pretty big loss with its recall and replacement program, it only represents less than 5 percent of the company’s projected net income of 23 trillion won (or $20.6 billion) for 2016, according to CultOfMac.
The battery suppliers for the Galaxy Note 7 is expected to shoulder some of the cost of the recall. Samsung SDI and Amperex Technology Ltd. are the two battery suppliers for Samsung Electronics — the former supplied 70 percent of the batteries that’s inside the Note 7, while the latter was responsible for the remaining 30 percent.
Samsung originally hoped to ship 4 to 5 million Galaxy Note 7 units during this quarter and an additional 8 to 9 million during the holiday/winter season. This recall may possibly bring its total sales down to 3 million during this quarter.
This will undoubtedly have a huge impact on Samsung’s third quarter sales, but it may not have an adverse effect on the long-term considering the company’s quick response to the issue. However, this unfortunate event will give Apple a huge advantage in the market since the iPhone 7 and iPhone 7 Plus are expected to be announced this Wednesday.