The catastrophic Galaxy Note 7 launch, recall, relaunch and discontinuation could deal a $17 billion blow to Samsung.
Back in early September, it was estimated that the Galaxy Note 7 recall could cost the company $1 billion. At that time, Samsung had recalled 2.7 million Note 7 units worldwide, but it still had hopes of fixing the whole exploding battery conundrum.
The company has now recalled the Galaxy Note 7 for a second time, as even the replacement units were prone to explosions. The second recall most likely spells the end of the fiery phablet, as Samsung has completely stopped production and the device has been pulled off the market altogether.
Samsung is still waiting for U.S. safety regulators to conclude the investigation and issue a verdict, but some analysts and investors expect Samsung to cut its losses and put the Note 7 behind it for good as the fiasco already affected the company's reputation and finances.
"In the worst-case scenario, the [United States] could conclude the product is fundamentally flawed and ban sales of the device," says HI Investment Securities analyst Song Myung-sub, as cited by Reuters.
Even if the device is not banned altogether, it's unlikely that it would still appeal to customers after two recalls and numerous reports of exploding batteries. If Samsung stops selling it for good, the discontinuation would amount to lost sales of up to 19 million units, or nearly $17 billion that Samsung was expected to make during the Galaxy Note 7's product cycle.
While Samsung can absorb the costs of the Galaxy Note 7 catastrophe, the company might have to reduce Q4 estimates for its mobile division by a hefty 85 percent, some analysts argue. Samsung's market valuation already dropped $18.8 billion, or 8 percent, on Tuesday, Oct. 11, and it's expected to slide even further.
Analysts also expect the Galaxy Note 7 fiasco to have a long-term negative impact on Samsung's brand and reputation, affecting demand for other Samsung smartphones as well.
If recovering from two recalls was not difficult enough, Samsung is also facing lawsuits over the defective device. The company received 92 reports of overheating Galaxy Note 7 batteries in the United States, including 26 reports of burns and 55 reports of property damage.
If you needed any proof that the Galaxy Note 7 fire risk is serious, Samsung's Galaxy Note 7 return kit includes a fire-proof box and gloves, as you can see in the video below, courtesy of XDA Developers.
