Here's How Samsung Plans to Compensate Galaxy Note 7 Components Suppliers

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Here's How Samsung Plans to Compensate Galaxy Note 7 Components Suppliers

Highlights

  • Samsung said it would fully pay for unused Galaxy Note 7 parts
  • To compensate suppliers for unfinished components
  • Fallout could hurt the South Korean economy

Samsung Electronics Co Ltd said on Tuesday it will compensate component suppliers for the discontinued Galaxy Note 7 smartphones and consider giving them orders for other models to cushion the blow.

The world's top smartphone maker said it would fully pay for unused Galaxy Note 7 parts that have already been manufactured, compensate suppliers for unfinished components and pay for materials bought to make Galaxy Note 7 parts.

Also see: Samsung Galaxy Note 7, a 'Potential Fire Hazard', Banned by 4 Australian Airlines)

"Samsung will determine the inventory levels for the partner companies and carry out compensation quickly," the company said in a statement, without elaborating on how much it expected to pay.

The decision comes after some South Korean government and central bank officials voiced concerns about the potential impact of the Galaxy Note 7 crisis on the domestic economy. A deputy finance minister said the fallout could hurt the economy during the third and fourth quarters of the year.

Though most of Samsung's smartphones are manufactured overseas, the company is a key customer for many South Korean parts makers including Samsung Electronics affiliate Samsung Electro-Mechanics Co Ltd.

(Also see: Samsung Galaxy S7, Galaxy S7 Edge Update Reportedly Brings Select Note 7 Features)

Samsung last week permanently ended sales of the fire-prone Galaxy Note 7 smartphone less than two months after launch, a decision the company expects will cost $5.5 billion (roughly Rs. 36,714 crores)  in operating profit from the third quarter of 2016 to the first quarter of 2017.

 

© Thomson Reuters 2016

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