Samsung operating profit plunges 30% in wake of Note 7 fiasco

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The world's largest smartphone manufacturer stopped making the Note 7 after reports of them catching fire.
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South Korean technology giant Samsung has seen profits plunge after the recall of its Galaxy Note 7 smartphone.

Operating profit between July and September fell 30% from a year earlier to 5.2tn won ($4.6bn, £3.8bn) – the lowest level in two years.

The world’s largest smartphone manufacturer stopped making the Note 7 after reports of them catching fire.

Meanwhile the firm’s shareholders have backed Samsung heir apparent Lee Jae-yong joining the board.

He is grandson of the firm’s founder Lee Byung-chull. and the son of Samsung chairman Lee Kun-hee.

The appointment is being seen as a major step towards his overall control of the family-run group.

But Mr Lee’s appointment has raised some questions from critics who say he has not held any major role at the firm and was taking a place on the board through birth rather than by merit.

Recalling and then scrapping the Note 7, which competed with Apple’s iPhone, has been seen as a blow for the company’s reputation for quality and reliability.

Samsung said its mobile phone unit would now focus on “expanding sales of new flagship products… as well as regaining consumers’ confidence.”

However its next major handset launch, the Galaxy 8 is not due until next year.

“Samsung has lost consumer confidence, but I think it still has at least one more chance. Rather than rushing to release the next product, it should conduct a thorough inspection and explain the results of its investigation into the Note 7,” said Greg Roh, an analyst at HMC Investment Securities.

Note 7 fiasco

Samsung had first tried to replace the phones with improved devices, but this was scrapped when reports started coming in of the new handsets also overheating and catching fire.

Eventually, Samsung stopped sales and halted production of the phone.

And while the weaker profit numbers were in line with the firm’s revised guidance, there was no doubt the fiasco had “a big impact” according to Jake Saunders of ABI research.

“It’s painful – the Note 7 should potentially have sold 15 to 17 million units and that’s gone,” he told the BBC. “That’s now suddenly an opportunity for other smartphone makers to jump in.”

The troubles come at a time when high-end smartphone makers are seeing sales slow – as they struggle to encourage consumers in developed markets to upgrade to newer models.

Earlier this week, Samsung’s main rival in the smartphone market, Apple, reported falling sales and revenue for the first time since 2001.

Report shared by The BBC