Note 7 nightmare costs Samsung $22 billion

The capitalization of Korean electronics giant Samsung Electronics has evaporated 22 billion USD in the last 2 sessions due to news of banning and warnings on using Galaxy Note 7 smartphones.

The company’s shares have fallen 11% since last Friday, and yesterday alone they lost 7%, bringing Samsung’s market capitalization to more than 200 trillion won ($186 billion).

This is the biggest two-day drop since 2008, after US authorities warned users about the Galaxy Note 7 battery explosion problem. Many aviation officials and airlines also called on passengers to stop using this phone while flying.

This suggests that Samsung’s brand may be hit even further than the estimated $1 billion cost of the recall. Samsung has spent heavily on marketing over the years, hoping to beat Apple by launching new products weeks in advance. But that advantage is slowly fading.

Note 7 is causing Samsung Electronics to struggle. Photo: Reuters

“Samsung’s nightmare is getting worse,” said Bryan Ma, vice president of product research at IDC. It’s possible that airlines will ban all Samsung phones, not just the Note 7, because it’s hard to differentiate between different phone models. “If that’s the case, the Note 7 could drag down the whole company,” Ma said.

Samsung announced a recall on September 2 after dozens of its smartphones had batteries that caught fire or exploded while charging. This happened less than a month after the company launched the product. Samsung said it had sold about 2.5 million units worldwide.

The U.S. Consumer Product Safety Commission (CPSC) and Samsung are working to issue a formal recall notice here as soon as possible. However, the agency's involvement also means that stricter consumer protection policies will be put in place. For example, U.S. law may prohibit the sale or resale of any recalled products.

"Uncertainty surrounding the Note 7 recall is rising following the tough response from the US. Samsung must settle this as soon as possible to reassure customers. In the worst case, they may have to consider stopping Note 7 sales for a while," said Lee Seung Woo, an analyst at IBK Securities.

This morning, Samsung Electronics shares increased again. By 11:30 (Hanoi time), this code had increased by 5.2%.

According to VNE