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Photo: Reuters
Photo: Reuters

Samsung’s challenge after battery fiasco

A total write-off of all Note 7 handsets would barely dent overall shipment numbers, but what may be unquantifiable is the loss to Samsung's reputation

Samsung’s Note 7 battery fiasco comes as the company has begun to rely on its telecommunications unit for almost half of its revenue.

As the world’s largest smartphone maker with a more than 20% market share, even a total write-off of all Note 7 handsets would barely dent overall shipment numbers. Yet, the reported cost of as much as $2 billion could take a relatively more painful toll on earnings as the Note 7 is a high-end device. Samsung currently charges 26% more per smartphone than the market average.

If it can maintain that pricing power despite recall costs and a possible decline in market share, then there’s every chance it can limit the downside.

What may be unquantifiable is the loss to Samsung’s reputation. Cutting prices to chase customers may help, but would result in slimmer margins. A better longer-term strategy would be to boost its R&D focus, invest more in quality control and spend money on marketing to win back trust.

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