Recall of Galaxy Note 7
Amid Samsung Electronics’ big decision to recall all of 2.5 million units of the Galaxy Note 7 after finding that their batteries are faulty, the smartphone industry is concentrating their attention on what impact the decision will have on the Korean tech giant in the future.
Foreign news media led by those of the U.S. expect that the recall will have a negative impact on Samsung Electronics since the recall decision will give reflected benefit to its rivals such as Apple or LG Electronics close to new product launches. In particular, they say that the decision will bring huge reflected benefit to Apple which many media expected not to announce a new product that can catch attention from consumers around the world.
But generally, a forecast is spreading that Samsung’s recall decision will give a financial burden to Samsung Electronics in the short term but turn a misfortune into a blessing by enhancing consumers’ confidence in the Galaxy Note 7 and therefore, brand loyalty to the phablet.
On September 4, leading US media predict that Samsung Electronics’ decision to replace all of 2.5 million units of the Galaxy Note 7 will be good news for Apple close to taking the wrap off a new iPhone.
It was generally forecast that while the Galaxy Note 7 will enjoy immense popularity in the world market through pre orders, the new iPhone will show poor performance due to a lack of big changes in design and functions.
But they say that Samsung Electronics’ recall can serve as a good opportunity for Apple.
“The iPhone 7 is expected to be boring,” Business Insider said. “The timing is perfect for Apple as it prepares to announce the iPhone 7 on Wednesday at an event in San Francisco.”
“Without announcing anything yet, Apple has already knocked all the wind out of Samsung. Even after Samsung fixes the problems with the Note 7, the device will remain tainted by those early reports of exploding batteries. It's the best gift Apple could have asked for ahead of next week's iPhone 7 debut,” Business Insider added.
“There’s no good time for a massive product defect, but the timing of the Galaxy Note 7 recall is especially unfortunate,” said Recode, an IT-specialized medium. “It’s too soon to say how much the recall will cost Samsung, but it is likely to be a hefty sum. First, it must replace the million or so phones already sold. Plus, it is likely to have to absorb some of the costs that retailers and carriers face in making things right for customers. But the biggest cost could be the lost momentum in the highly hit-driven smartphone business. It will be worth paying close attention to how well the Note 7 does when it goes back on sale.”
This massive recall decision will cost Samsung Electronics a whopping 2.5 trillion won supposing that one unit of the Galaxy Note 7 is one million won. In the second quarter, its IM Division posted 4.32 trillion won in operating profit. Simply put, Samsung will suffer loss which is half the operation profit of the second quarter.
Dominant predictions are that Samsung Electronics will receive a poor scorecard in the short term but have positive effects in the long term.
“Samsung isn’t the first smartphone maker to run into battery-safety issues. Apple earlier this year recalled adapters sold in Europe and other regions, citing a dozen cases in which they had delivered electric shocks,” the Wall Street Journal reported. “The decision will not have a negative impact on the Korean tech giant in the long term and Samsung’s decision was fast and right.”
“The battery accident will have a deleterious effect on Samsung Electronics in the short term but the negative effect will be short-lived,” the Financial Time said by quoting an analyst.
“Samsung has suspended sales of its brand-new top-end Galaxy Note 7 smartphone and is offering replacements for anyone who has already purchased one, but has stopped short of a full recall,” the UK’s Guardian said.
The South China Moring Post quoted Koh Dong-jin, president of Samsung Electronics as saying, “We place a top priority on the safety of consumers.” Samsung will launch the Galaxy Note 7 in Hong Kong, Macao and mainland China since products to be sold there have batteries different from those which caught fire, the newspaper added.
“The recall decision will serve as an opportunity to increase customer loyalty in the long term. It also reinforced consumer confidence in the Samsung brand,” said a representative of the smartphone industry. “The recall will bring positive effects to Samsung Electronics as the recall shows that the company will be responsible for its products to the end.
Some industry experts say that Samsung Electronics may enjoy an increase in sales once again in the fourth quarter of this year as consumers may have more confidence in the quality of the Galaxy Note 7 produced after the recall decision and subsequently its supply is normalized. Consumers may do as they will believe that the recall decision will lead to Samsung Electronics’ more attention to quality management to prevent similar cases from taking place, they added.