Amid the fallout of the decision to stop production and sales of the Galaxy Note 7, Samsung said that it will be compensating suppliers of components for the controversial smartphone.
Samsung said that it will be making full payments for Galaxy Note 7 parts that have already been manufactured but are still unused. In addition, the company will be sending compensation to the suppliers for unfinished parts and the materials that have been purchased for the production of the components.
"Samsung will determine the inventory levels for the partner companies and carry out compensation quickly," said the company in a statement. There is no indication, however, on how much Samsung is expecting to pay in the planned payments.
Shortly after deciding to temporarily suspend the production of the Galaxy Note 7 just over a week ago due to replacement units still reported to be catching fire with exploding batteries, Samsung shut down sales of the smartphone worldwide. The company then also requested owners of the device to turn off the Galaxy Note 7 and to take advantage of the different replacements offers available for the smartphone.
The Galaxy Note 7 situation forced Samsung to lower its expected operating profits for the third quarter by $2.3 billion, as the company had to take into account the financial impact of the worldwide recall program launched for the smartphone and the decision to end its production and sales.
The impact might not only be felt by Samsung though. Officials of the government of South Korea and its central bank have voiced their concerns that the Galaxy Note 7 fiasco could affect the entire domestic economy of the Asian country, as Samsung is an important customer for many component suppliers in South Korea.
A deputy finance minister added that the effects might damage the South Korean economy over the remaining two quarters of the year. Samsung's decision to compensate suppliers will look to mitigate the impact and keep the financial burden largely within the conglomerate.
It was recently revealed that tests made on the battery of the Galaxy Note 7 were done in-house, which is unconventional in the tech industry as most companies resort to third-party firms to provide the testing. Samsung's tests did not reveal any issues with the batteries for both the original batch of the smartphones and the replacement units.
Galaxy Note 7 owners who still have the smartphone with them should immediately have their device replaced with another model, as the fire hazard that it carries is something that should not be taken lightly.
