As Samsung is recalling the Samsung Galaxy Note 7, they’ll replace the batteries in all their units to ensure that all the smartphones which will be flying off the shelves are safe to use. Reports from inside Samsung’s mobile division are suggesting that they’re completely going to drop batteries produced by its own Samsung SDI subsidiary, at least from use in the Galaxy Note 7.
Estimated is that up to this date Samsung produced around 2.5 million units of the Samsung Galaxy Note 7, of which around 70% uses a battery made by Samsung SDI. The other 30% of all the batteries used inside those units are coming from the Chinese battery maker ATL. If these reports end up being true, Samsung will need to purchase more batteries from ATL for its recall and future stock of the Note 7. Another possibility is that Samsung may use batteries from the familiar supplier LG Chem to make sure enough batteries are available.
“For the global recall of 2.5 million units, Samsung SDI is expected to bear the expense for most of the battery parts” – Lee Seung-hyuck, analyst at Korea Investment & Securities
Samsung stated that the problems with defective batteries are the leading cause of reported Note 7 explosions and fires. We now know that Samsung is actually responsible for the development and manufacturing of these defective cells. In the end of 2014 Samsung SDI started developing non-removable batteries as an effort to get even more components from within the company itself, which could lead to an improvement in profit margins. Most of the batteries inside the Galaxy S6 or S7 didn’t come from Samsung SDI, so this is basically their first phone from Samsung which is using this amount of in-house batteries.
What will the Samsung Galaxy Note 7 recall cost for Samsung?
As a result of the decision, Samsung SDI will lose important revenue from the sales of the Samsung Galaxy Note 7. And if you’re going to combine that with the costs of replacing the battery parts, Samsung SDI could be looking at a loss of 18 billion won ($16 million) in the third quarter of 2016. The costs for Samsung from the recall of all Note 7 units is currently somewhere in the region of $1 billion, and the costs could keep going up if the slow sales have a knock on effect for all the other various business components of the company.