The Samsung Galaxy Note 7 was expected to be a hit in the smartphone market, and initially it was, with Samsung having trouble keeping up with demand for the device. Within a few weeks of its release, over 2.5 million Galaxy Note 7 units were shipped around the world. However, this took place before the recall of the device, and the subsequent fiasco which plagued the device, forcing the South Korean electronics manufacturer to pull the plug on the device. The company is set to lose over $5 billion in operating profit but Samsung is not the only company to be affected by the whole crisis as component suppliers of the ill fated device are also set to lose out.
However, in a new move by Samsung, the company announced that it will be compensating component suppliers for the discontinued Galaxy Note 7. To cushion the blow, the smartphone manufacturer is also considering giving them orders for components for other smartphones in its lineup. The company also said that it will be paying in full for all unused Galaxy Note 7 parts which have already been manufactured, compensate the suppliers for unfinished components and even pay for materials bought to manufacture the Galaxy Note 7 components. In a statement, Samsung said that it will determine the inventory levels of its partner companies and carry out the compensation process quickly. However, Samsung did not elaborate further regarding the expected payout amount to its suppliers.
This comes after the South Korean government as well as central bank officials raised concerns about the impact the Galaxy Note 7 fiasco would have on the economy of the country. Even though most of Samsung's smartphones are produced overseas in countries such as Vietnam and India, the company happens to be a key customer for many South Korean component manufacturers. One of these makers is Samsung Electro-Mechanics, a subsidiary of Samsung. Samsung permanently halted the production and sale of the Galaxy Note 7 last week, after replacement units which were given out during the first recall, caught on fire. The company is currently issuing full refunds to all Galaxy Note 7 owners and it is also investigating the cause of the fires.