Samsung Electronics to Compensate Its Partners for Their Investments for Development of Galaxy Note 7’s Components

Oct 19, 2016

Samsung Electronics is planning to compensate for all of its partners’ Galaxy Note 7 components that are in stock in order to lessen and minimize any financial loss for rear-end industries due to discontinuation of Galaxy Note 7. Its partners are welcoming compensations since they will be able to lessen financial burdens.
Samsung Electronics made an announcement on the 18th that it will be compensating for all of Galaxy Note 7’s finished and half-finished components that are in stock and subsidiary materials that were prepared to produce such components. Samsung Electronics is going to check how much components are in stock and compensate its partners as soon as possible.
It is heard that there are about 70 businesses that are associated with compensations from Samsung Electronics, and about $267 million (300 billion KRW) are going to be compensated to them.
Samsung Electronics is going to compensate all of unit cost of finished components and compensate half-finished components based on production cost of process that is used to produce such components. It has decided to compensate all of subsidiary materials, which indicate raw materials and materials that are used along with raw materials, based on unit cost that was spent by its partners.
Samsung Electronics is planning to continue this compensation, which is for first-level partners, onto second-level partners that had supplied components and third-level partners that were in charge of manufacturing.
“We are sorry that we have caused financial trouble for our partners due to discontinuation of Galaxy Note 7.” said Team Leader (Vice-President) Park Jong-seo of Samsung Electronics Wireless Business Department Purchasing Team. “We are going to prepare compensation as soon as possible in order to minimize difficulties for our partners as much as possible.”

Samsung Electronics is going to compensate all of cost that is used for inventory of Galaxy Note 7’s components that are in possession by its partners.  This was done in order to minimize any negative effects from discontinuation of Galaxy Note 7 will have on rear-end industries. <Samsung Electronics is going to compensate all of cost that is used for inventory of Galaxy Note 7’s components that are in possession by its partners. This was done in order to minimize any negative effects from discontinuation of Galaxy Note 7 will have on rear-end industries.>

Samsung Electronics also had carried out similar policy in the past when components had become unused or when estimated amount of shipment did not equal to actual amount of shipment. There was huge concern for Samsung Electronics’ partners because there are many components along with iris-recognition cameras that are difficult to be recycled and there are many supplies that were made more than initial order.
Samsung Electronics’ partners are welcoming compensations from Samsung Electronics. “We are able to lessen financial burden due to compensations.” said a representative for one of Samsung Electronics’ partners. “We will be able to reduce financial loss from discontinuation.”
Although Samsung Electronics was able to solve a problem regarding components that are in stock, it does not mean that it was able to solve all problems. Galaxy Note series was chosen as the major source of sales for component manufacturers in second half of this year because it was expected that amount of sales will be huge not only in South Korea but also in foreign countries. Even though these manufacturers invested huge amount of hours and effort into development of components, business opportunities for them disappeared due to discontinuation. Especially businesses that have prepared to produce components such as iris-recognition cameras or digitizers for Galaxy Note 7 are now facing a problem regarding what they should do with facilities that are supposed to produce such components.
“Even if businesses reinforce their production lines and employees, they are going to have financial burdens if major source of sales for them disappears.” said a representative for an industry. “If Samsung Electronics creates opportunities by increasing production of other products other than Galaxy Note 7, it won’t be a huge financial burden for these businesses.”
Samsung Electronics announced that it will actively examine into assigning supplies of other Smartphones for its partners that are suffering due to reduction of sales. It also added that it will prepare separate measures for facilities that were set up just for Galaxy Note 7 so that they can be used for other models.
Staff Reporter An, Hocheon | hcan@etnews.com & Staff Reporter Yun, Keonil | benyun@etnews.com

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