Note7 recall to cost at least $5.3b

Seoul - Airlines add 'fire containment bags' for overheating phones

Samsung Electronics said on Friday that the discontinuation of the Galaxy Note7 would cost the company about $3 billion during the current and next quarters, bringing the total cost of the recall to at least $5.3 billion.
The Note7 discontinuation will cost in the mid-two trillion won range during the October-December period and another one trillion won ($884 million) during the January-March quarter, the company said in a statement.
Samsung already slashed its third-quarter profit forecast by $2.6 billion earlier this week, an amount that could wipe out its entire mobile business profit. That did not include the cost of Samsung's first recall, which analysts estimated at one trillion won to 2 trillion won.
Samsung has enough cash and other businesses to absorb the shock from the phone recall. It said it expected to generate 5.2 trillion won ($4.6 billion) in operating income during the third quarter after the recall cost. Analysts said most of the income will be generated by sales of advanced displays and semiconductors. Samsung added that it will make significant changes in its quality assurance processes to enhance product safety for consumers. It did not elaborate.
The company said it will expand sales of two other smartphones released in spring, the Galaxy S7 and Galaxy S7 Edge, quashing rumors that it may try to release updated versions of those devices. Samsung usually releases a new iteration of the Galaxy S series in spring, so the company may have to provide a strong incentive to sell the six-month-old phones, such as lowering their prices. Due to unexplained fires and overheating problems, more than 2.5 million Galaxy Note7 smartphones were recalled before the product was discontinued earlier this week just two months after its launch in August.
In the United States, 1.9 million Note7 phones are subject to the two recalls. Samsung also recalled about 200,000 phones in China and about half a million phones in South Korea.
The US Consumer Product Safety Commission said there were 96 reports of batteries in Note7 phones overheating in the country, including 23 new reports since the first recall announcement last month. The company received 13 reports of burns and 47 reports of property damages associated with the phones.
"Consumers should immediately stop using and power down all Galaxy Note7 devices, including Note7 devices received as replacements in the previous recall," the agency said.
The botched recall raised questions about Samsung's initial analysis of the Note7 phone's problems. At first, Samsung said a minor manufacturing error in the batteries for the Note 7 was causing the phones to overheat.
 
'Fire containment bags' for overheating phones
Some airlines are taking extra steps to prevent a disaster in case a passenger's device powered by a lithium ion battery catches fire during flight.
At least three US airlines are adding new fire-suppression equipment to fleets in case a cellphone or laptop battery overheats, catches on fire and can't be extinguished.
The issue has taken on new urgency following incidents of overheating Samsung Galaxy Note7 phones, including one on a Southwest Airlines flight earlier this month. The Federal Aviation Administration has taken the unusual step of warning passengers not to use or charge the devices while on board and not to stow them in checked luggage.
One of the first airlines to deploy fire-containment bags on its entire fleet was Alaska Airlines. The Seattle-based airline finished adding them to its 219 planes in May, a process that took two months from concept to deployment.