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Samsung Note 7 Recall Would Dent Samsung Handset Profit Margin by 1.5% in 2016

by Linda Sui | Sep 02, 2016

Samsung formally recalled Note 7 globally due to battery problem today. It has sold out 2.5 million units of Note 7 worldwide so far. All key operators and retailers / distributors have suspended selling the new device in South Korea, US and other countries. Samsung is trying to recall and replace all sold Note 7 models within the following two weeks.

Given the sleek design, double edged display and iris recognition sensor, as well as other features, we previously forecasted Samsung would ship 14 million units of Note 7 globally in 2016. However, recall and potential damage to brand and consumer confidence would reduce the target from 14 million to less than 10 million units this year.

Financially, we estimate Samsung would lose US$5,000 million revenue from recall and reduction of Note 7 sales this year. The figure roughly makes up 5-6% of Samsung total mobile phone revenue in 2016. Furthermore, it would also dent Samsung handset profit margin by 1.5%, due to reduced revenue and higher recall / repair cost.

The Korean giant is having a tough time.

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