Latest update October 26th, 2016 10:55 AM
Oct 19, 2016
SEOUL: Samsung Electronics said Tuesday it would compensate suppliers hit by the decision to scrap its Galaxy Note 7 smartphones because of safety fears with exploding batteries.
The South Korean electronics giant announced a week ago that it was discontinuing the Note 7 after a chaotic recall that saw replacement phones also catching fire.
Samsung said the affair would cost the company an estimated $5.3 billion in lost profits over the three quarters beginning July.
The crisis also hit its numerous suppliers — who produce everything from camera modules to casings — with their losses estimated at up to $1.7 billion.
“We will offer full compensation for remaining inventories of Note 7 components among our suppliers,” the firm said in a statement.
“We feel sorry for causing concern among our suppliers due to discontinuation of the Galaxy Note 7…we will complete the compensation quickly to minimise difficulty faced by them,” it said.
The statement provided no specific figures, but said the payout would be calculated according to the different suppliers´ inventory volumes.
Given the Samsung Group´s stature within Asia´s fourth-largest economy — it accounts for around 17 percent of GDP — the Note 7 debacle has had a national impact.
The central Bank of Korea said it had taken the crisis into consideration when it trimmed South Korea´s 2017 growth outlook to 2.8 percent last week from its previous 2.9 percent forecast.
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