Galaxy Note 7 recall costs expected to top $1 billion

Just as things were looking really good for Samsung with the launch of its popular Galaxy Note 7 smartphone, it all went wrong. Reports of Note 7 smartphones catching on fire while charging started coming in and then Samsung officially announced a recall on all of the Note 7 smartphones that had been sold. Analysts are now chiming in on what the recall is expected to cost Samsung, and the number is massive at $1 billion.

Samsung plans to replace all 2.5 million Note 7 smartphones shipped since the device launched a few weeks ago. So far, the number of Note 7 smartphones that have caught fire stands at about 36 and all were charging at the time of the fire. The recall comes at a time when Samsung was finally getting back into the grove with products that were selling well and expected to compete well against the new iPhone models set to launch this week from Apple. Even worse than the monetary cost for the recall is the damage done to the Samsung brand.

"The potential damage to reputation is far greater than short-term financial losses," said Chang Sea Jin, a professor at the National University of Singapore.

Samsung has offered no official statements on the cost of the recall; the $1 billion number tossed around is an estimate from analysts. All Samsung has said officially about the cost of the recall is that the number is a "heartbreaking amount." The dollar figure for the recall certainly won't break Samsung despite all the zeros.

Samsung is expected to post a net income of $20.6 billion this year. The upside for Samsung in this is that the company who provided the batteries for the smartphone will undoubtedly bear its share of the cost for the recall. Samsung hasn't stated who the official battery supplier is for the Note 7. However, Korea Economic Daily says that 70% of the batteries were provided by Samsung SDI with 30% of them from Amperex Technology Ltd. If you own a note 7 and need to know what to do with your device, we have all you need to know here.

SOURCE: Bloomberg