Samsung to compensate Note7 parts suppliers

A South Korean employee provides a replacement Samsung Galaxy Note7 smartphone at a telecommunications shop in Seoul.
A South Korean employee provides a replacement Samsung Galaxy Note7 smartphone at a telecommunications shop in Seoul.PHOTO: AFP

SEOUL (REUTERS) - Samsung Electronics said on Tuesday (Oct 18) it will compensate component suppliers for the discontinued Galaxy Note7 smartphones and consider giving them orders for other models to cushion the blow.

The world's top smartphone maker said it would fully pay for unused Note7 parts that have already been manufactured, compensate suppliers for unfinished components and pay for materials bought to make Note7 parts.

"Samsung will determine the inventory levels for the partner companies and carry out compensation quickly," the company said in a statement, without elaborating on how much it expected to pay.

The decision comes after some South Korean government and central bank officials voiced concerns about the potential impact of the Note7 crisis on the domestic economy. A deputy finance minister said the fallout could hurt the economy during the third and fourth quarters of the year.

Though most of Samsung's smartphones are manufactured overseas, the company is a key customer for many South Korean parts makers including Samsung Electronics affiliate Samsung Electro-Mechanics Co Ltd.

Samsung last week permanently ended sales of the fire-prone Note7 smartphone less than two months after launch, a decision the company expects will cost US$5.5 billion (S$7.63 billion) in operating profit from the third quarter of 2016 to the first quarter of 2017.