News & Politics

Samsung's Note 7 Debacle Impacts South Korea's Growth Forecast

REUTERS/Kim Hong-Ji - RTSS0H5

Rough week for the tech giant gets rougher.

South Korea’s central bank on Thursday trimmed its 2017 growth outlook, having considered the potential impact of Samsung’s Note 7 recall crisis on the national economy.

The electronics giant announced Tuesday it was scrapping production of the new smartphone, following reports that replacements for combustible models were also catching fire.

The move sent Samsung’s share price into a steep dive and forced it to slash its third quarter profit estimate by a third.

With Samsung accounting for around 17 percent of South Korea’s gross domestic product, such a major business reversal is likely to have a national impact, Bank of Korea Governor Lee Ju-Yeol said.

I’ve had bad weeks at work, but I’ve never had, “Hey, you’re dragging the country’s economy down” bad weeks. As far as I know, at least.

As an avid consumer of Samsung products, I sincerely hope the company handles the post-Note 7 debacle PR better than it took care of things mid-debacle. It’s probably safe to say that if Samsung were a smaller company it wouldn’t survive this. Thankfully, it’s a tech behemoth, and as I am staring at my Samsung monitor while I write this it is a comfort to know that its entire fortune isn’t wrapped up in one product.

Despite the company’s still powerful position, some think that this problem will have negative effects that won’t go away any time soon.

Its smartphone franchise, the top globally with a 23% market share in the second quarter according to IDC, could hemorrhage sales to rivals such as Apple, LG, Huawei Technologies and new entrant Google with its Pixel phone.

“The poor response Samsung had getting in front of this problem will have a lingering effect,” says Steve Beck, founder of New York-based management consultancy cg42. “It could take one, maybe two, product cycles to recover. In the smartphone market, habits can form quickly.”

How quickly do smartphone consumers begin to change habits?

BlackBerry was the dominant player in this game just seven years ago.

Also, in case you missed it, here were some of the more lighthearted social media responses to the permanent halt of Note 7 production. Apologies to South Korea, of course.