The extraordinary cost of the Galaxy Note 7 recall and withdrawal has been revealed in the latest financial figures from Samsung.
On Wednesday, the company revealed its preliminary third-quarter earnings and slashed estimated operating profit from 7.8 trillion Korean won to 5.2 trillion won.
The difference is US$2.3bn, almost all of which can be attributed to the disastrous rollout of the company's new smartphone, the Galaxy Note 7; then a massive battery replacement program after a significant number of explosions; and then a complete recall and possible scrapping of the brand altogether after those replacements were also found to be faulty.
Even worse, the full cost of the recall may be much higher. The previous earnings figures, according to a Samsung spokesperson, had accounted for the recall; the new, lower figures are the company's estimates for how many customers will demand a refund for their Note 7 rather than accept an exchange for a different Samsung phone. The real total cost of the Galaxy Note 7 might be as much as $4bn.
The revised figures caused the company's share price to drop yet again: over the past three days it has fallen 10 per cent, wiping roughly $19bn off its overall value.
We're told that Samsung has built 2.5 million Galaxy Note 7 phones, all of which will mostly be scrapped. The South Korean giant decided to glue the handheld's battery in place in this model, rather than make it easily replaceable. When it turned out the battery had a serious design flaw, it was impractical to unglue and replace the power packs again and again – simply, the whole line had to be recalled and destroyed.
Thinking inside the box
In the meanwhile, Note 7 customers have been receiving special fireboxes in which to send back their potential bombs.
While many Note 7 customers have been returning their phones to the retail outlets they bought it from, many bought it direct from Samsung. They quickly found, however, that FedEx and UPS refused to accept the returns out of fear that they could explode.
And so Samsung has sent out a rather unusual recall box. It comes with instructions. You need to power off your phone/mini-bomb, then put it in an anti-static bag and place it inside a cardboard box. Then you have to put that box inside another cardboard box. And then that box goes inside a special firebox with ceramic fiber insides.
Even better, because that ceramic fiber is not the nicest of materials, the kit comes with a pair of latex gloves so you don't scratch up your skin. You can see the whole kit online.
Even with all of this however, you are informed that the box can only be sent by truck – the box is not welcome on any planes. And for good reason. ®