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Galaxy Note 7 recall could cost Samsung $1 billion

Note 7

How much will it cost to replace the 2.5 million Samsung Galaxy Note 7 handsets that are set to be recalled in response to a battery fire scare? A "heartbreaking amount", according to Samsung.

While the company wouldn't reveal an exact figure, the cost likely stands at around $1 billion (roughly £750 million / AU$1.3 billion) based on estimates compiled by Bloomberg.

That's a huge figure, especially when only around 35 of the handsets (less than 0.1% of the total volume sold) have been found faulty. But given that the faults have led phones to catch fire, it's arguably a necessary measure.

The timing is bad too, with the iPhone 7 and iPhone 7 Plus launch just days away and Samsung now lacking a new handset to directly compete with them.

How to save a reputation

But the financial impact represents less than 5% of Samsung's projected $20.6 billion (around £15.4 billion / AU$27 billion) net income for the year, so it's a cost the company can bear. Also, by addressing the situation early, Samsung may have minimized the damage to its reputation, which could be far costlier in the long run.

Still, for anyone undecided between Samsung and Apple's latest offerings, the fault, and the delays caused by it, will surely push more buyers into Apple's camp.

  • Another big phone is on the horizon in the form of the LG V20