Samsung’s Note7 recall preserved its stock, image

Samsung Electronics’ bold decision to recall 2.5 million Galaxy Note7s has possibly helped the world’s leading smartphone manufacturer avoid seeing its stock value plummet and a backlash from consumers.

The company’s shares bounced back to the level seen a week ago, adding 2.3 percent from the previous trading day to close at 1,643,000 won ($1,486). The share price was last at this level on Aug. 31 when it closed at 1,645,000 won. Shares had fallen below 1.6 million won on Thursday.

Samsung Electronics decided to replace all of the phablets after consumers reported the phone’s batteries caught fire or melted while charging.

Analysts say Samsung’s decision to take on 1 trillion won in losses from the recall has minimized consequences to its brand’s image.

“It would jeopardize their revenue in the short-term but the swift and bold decision they made will eventually lead to enhancing consumer confidence in the long-term,” said Lim Do-ri of Shin Young Securities.

But Samsung Electronics affiliate Samsung SDI, which supplied batteries for the new phablet, struggles to recover from the shock. Samsung SDI reportedly provided 70 percent of the batteries in the Galaxy Note7, while the remaining batteries were supplied by China’s Amperex Technology.

Samsung SDI shares on Tuesday closed 2.38 percent higher. But share prices have fallen for eight consecutive trading days, lowering the value of the stock 13 percent to 105,500 won.

Foreign investors have increased purchases of the battery suppliers’ shares despite Samsung Electronics saying it will not use Samsung SDI batteries in its Note7. Analysts say this will likely deliver a blow to the company’s third-quarter performance. Other businesses including its electric-car battery supplies are also at risk.

“The reason behind Galaxy Note7’s explosion has been tentatively concluded to SDI’s battery which means they wouldn’t be able to supply their batteries for the phablet for the time being,” said Kim Un-ho, an analyst at IBK Securities. “Their Q3 earnings are prospected to shift to deficit due to this incident,” he added.

BY JIN EUN-SOO [jin.eunsoo@joongang.co.kr]