Samsung Electronics saw its third-quarter revenue fall following a global recall of Galaxy Note 7 smartphones for a fire hazard of batteries, the company said on Friday.
Preliminary figure for Samsung's revenue was 49 trillion won (44 billion U.S. dollars) in the third quarter, down 5.19 percent from a year earlier. From the previous quarter, the revenue declined 3.81 percent. The revenue fall followed the company's decision in early September to recall all of about 2.5 million Galaxy Note 7 smartphones shipped across the globe.
A number of cases that the Note 7 phones caught fire while charging were reported, leading many airlines to prevent passengers from holding the phones on flight for a fire hazard of batteries.
According to the U.S. Consumer Product Safety Commission (CPSC), there were 92 reports of battery overheating only in the United States, including 26 cases of burns and 55 involving property damage.
It is estimated that Samsung reported about 1 trillion won in losses from the Note 7 recall, but the exact figure would be announced later this month after an external audit.
The South Korean tech behemoth posted 7.8 trillion won in operating profit during the July-September period, up 5.55 percent from the same period of last year. It was down 4.18 percent from 8.14 trillion won tallied in the previous quarter, which was the largest in more than two years.
The third-quarter profit beat market expectations of about 7.4 trillion won thanks to brisk sales of semiconductors and display panels, analysts said. Samsung's semiconductor business is estimated to have improved on the back of higher prices of DRAM chips and NAND Flash memory chips.
Samsung has shown its competitive edge in the third-generation NAND flash sector. The display panel unit is believed to have outperformed competitors due to demand for organic light-emitting diode (OLED) panels used for smartphones.
Despite the robust performance of chips and flat screens, the Galaxy Note 7 recall is estimated to have pulled down its operating profit in the mobile phone unit to about 3 trillion won in the third quarter, down from 4.3 trillion won in the previous quarter.
Expectations remained uncertain for Samsung's fourth-quarter earnings as the confused recall process disappointed global consumers. Samsung failed to advice Note 7 users to turn off the fire-prone phones, though the company gave the advice belatedly.
The failure resulted in further reports of exploding while charging or even in normal use. Confused messages were given to South Korean consumers as Samsung said a software patch was to be released to limit the maximum charging capacity of Note 7 phones to 60 percent.
It hinted that users can charge the phones without danger of catching fire. Samsung provided a missed estimation data as it said only 24 out of every 1 million Note 7 phones have battery problem. Only in the United States, more than 90 cases of battery problem were reported.
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