Samsung Electronics Reports Decline in Profit Post Galaxy Note7 Fiasco

Samsung Electronics reported a sharp fall in its quarterly earnings due to the disastrous recall and discontinuation of the Galaxy Note 7 smartphones.

The South Korean multinational conglomerate observed the world’s largest smartphone recall in September after their flagship smartphones caught fire. It was finally discontinued after the replacement phones also reported the same problem. The Galaxy Note 7, dubbed as the iPhone killer was killed in less than two months after its launch.

The company had said earlier this month that it expects to take an extra hit of about 3.5 trillion won from the Galaxy Note 7 fiasco in the last three months of 2016 and the first three months of next year.

For the components businesses, operating profit increased QOQ due to expanded sales of high-end products, such as SSDs and flexible OLED panels, but decreased marginally YOY due to a price correction for DRAM during the first half of 2016.

For the IT & Mobile Communications Division, earnings declined due to the Galaxy Note7 discontinuation. However, smartphone shipments remained solid due to continued stable sales of its existing flagship devices, including the Galaxy S7 and S7 edge, and steady growth in the mid-tier Galaxy A and J series.

As for 2017, the company is expecting a turnaround with the launch of new flagship Galaxy S8 which is expected to be released next February. Industry experts believe that Samsung is going to add an artificial-intelligence service like Siri offered by Apple Inc. Earlier this month Samsung bought AI company Viv Labs.

Next year will also see expansion of Samsung Pay roll-outs and cloud-related services. Meanwhile, the Networks business expects to see continued improvement in profitability on the back of 4G LTE expansion in markets around the world.