Fitch: Samsung risks "long-term brand damage" from phone recall

Samsung faces the prospect of "long-term brand damage" over safety scares plaguing the flagship Galaxy Note 7 smartphone, the ratings agency Fitch said Thursday.

"Potential long-term brand damage from the recall and production suspension of Samsung's Galaxy Note 7 phone is a greater threat to its credit profile than the direct financial impact, which will be buffered by ample liquidity and a strong balance sheet," Fitch Ratings said.

The benefits of Samsung's "diversified product portfolio have reduced its vulnerability to this shock" and "[i]ts other divisions, such as semiconductors, displays and consumer electronics, continue to record robust operating performance," Fitch said.

However, the problems with the Galaxy Note 7, which has been hit by safety concerns after numerous reports of the phones catching fire, "have highlighted weaknesses both in R&D capabilities and the company's capacity to efficiently remedy serious hardware defects."

Samsung only started selling the phone on August 19. The company announced Tuesday that it was discontinuing production following an embarrassing global recall and persistent reports that some of the devices and their replacements had caught fire.

The 850-euro (940-dollar) device was aimed at the premium range of the market, where the iPhone from Apple is especially strong.

Fitch's assessment came as the United States Consumer Product Safety Commission announced the recall Thursday of a further 900,000 Galaxy Note 7 smartphones after recalling 1 million of them mid-September.

Last update: Thu, 13/10/2016 - 16:41

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