The South Korean Giant, Samsung Electronics Co Ltd. (KRX:005930), has finally decided to scrap its flagship device Galaxy Note 7. Since its launch, there has been a lot of complaints about the batteries catching fire. Soon, the company announced a recall and sought to replace the already sold 2.5 million units. Even after the replacement, the issue did not die out. Rather, the frequent battery burning complaints has now forced Samsung to halt the production of Galaxy Note 7 completely. The impact of this decision will show up on its earnings. Already, the operating profit for Q3 2016 has dipped by 1/3rd due to the decision of closing down the entire production of this device.
On October 7, Samsung has announced its earnings guidance for Q3 2016, reporting sales amounting to 49 trillion Korean won ($43.6 billion) and an operating profit of 7.8 trillion Korean won ($6.9 billion). However, one day after the decision to scrap the Note 7, the company released the updated earnings guidance report for the same quarter with sales amounting to 47 trillion Korean won ($41.8 billion) and an operating profit of 5.2 trillion Korean won ($4.6 billion). Clearly, the fall is due to the Galaxy Note 7 debacle.
Samsung is paying an enormous price for its compromise over quality. It has cost them a loss of around $2.3 billion in less than two months since the launch of the Galaxy Note 7. All the expenditures that the device incurred went in vain. From manufacturing to marketing, the processes incur high costs for a premium smartphone. Even the carrier partners AT&T and T-Mobile has stopped sales and exchanges of Note 7 due to reports of the current issue. The company itself failed to understand the exact reason for this problem. This situation is now extremely hazardous for the company. However, the decision to halt the production is undoubtedly seen as a measure to ensure the safety of the customers.
What Will Happen to the Note Legacy?
The Note 7 debacle is going to impact the company heavily. Galaxy Note 7 was launched as the flagship device which instantly wooed everyone with its innovative features, elegant look and the stylus pen. However, with the demise of Note 7, now Samsung will have a hard time convincing its buyers to trust on any other devices launched under the Note series.
It will be a smart move for the brand to abandon the Note series entirely to avoid any future losses. The scars of this debacle will remain associated with the brand almost forever. Hence, if the rumours of Note 8 from Samsung comes true, the chances are high that Note 8 will continue to be shrouded by the unfortunate events of Note 7. The sales and reputation of the new device and the brand might be at stake!
Abandoning the Note series will be a huge step for the company. After all, it incurred years of research and expenses to give the users a different experience with Note devices.
Will Galaxy S8 Pay The Price?
Since the failure of Galaxy S5, Samsung left no stone unturned to manufacture an innovative Galaxy S series. The incident, undoubtedly, has affected company’s reputation which might also affect its other series of devices. However, Galaxy S7 has been one of the best designed and feature loaded phone that the smartphone market had seen in a very long time. With the device being highly successful in the market, consumers might still consider buying the Galaxy S8 if the company ensures the safety point. The company needs to make the device as innovative as possible at best possible cost. Of course, safety issues will be a prime concern this time.
What Does the Future Has in Store for Samsung?
Samsung has been the best Android player in the market. Although the Note 7 incident is a huge setback for the company, it could also mean that the upcoming devices would be safe. The company at this juncture cannot afford to face any issue with its future devices. The South Korean giant still has a lot of potentials which other OEMs lack. If we keep aside the exploding battery issues and see, the device was an innovation house. Before the issue started, the device received the best reviews across the market.
However, it is still a huge disappointment for the company. The repercussions will affect the company. However, it all depends on how Samsung tackles the safety issues keeping intact the promised innovations and features in the upcoming devices.