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September 12, 2016

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Samsung faces US$5 billion Galaxy bill

SAMSUNG Electronics Co Ltd on Saturday urged users of its Galaxy Note 7 phones to turn in their handsets as soon as possible as part of a recall aimed at limiting the damage caused by the fire-prone devices.

The world’s top smartphone maker said last week it would exchange all Note 7 phones in 10 markets including South Korea and the United States, a costly setback for a company that was counting on the US$892 model to bolster sales momentum as rivals such as Apple Inc launch new devices.

“We are asking users to power down their Galaxy Note 7s and exchange them as soon as possible,” said Koh Dong-jin, head of Samsung’s smartphone business.

Reports that the phones’ batteries have combusted while charging or in normal use prompted the US Consumer Product Safety Commission to stop using the Note 7 device.

Some analysts say the recall could cost Samsung nearly US$5 billion in revenue, after accounting for expenses from the recall process.

Aviation authorities and airlines across the world have also issued bans or guidelines prohibiting passengers from turning on or charging the phone inside planes in response.

For Samsung the scale of the recall is expected to be unprecedented. Some 2.5 million of the premium devices have been sold worldwide, the company has said. “The cost of the recall is going to be astronomical,” said the chief executive officer of Real-World Forensic Engineering, Jahan Rasty.

“They have to compensate people, fix the problem and give them a revised version of the product that doesn’t have the same manufacturing or design defect. “The longer this story lingers, the more it will etch itself in people’s minds,” the product liability expert said.

On Thursday, the US Federal Aviation Administration said travelers should not use or charge them while in the air, or stow them in checked luggage. South Korea made similar recommendations on Saturday.



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