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Galaxy Note7 recall hits Samsung’s profits, but not market lead

Samsung retained its smartphone market leadership in the third quarter despite recalling and scrapping the Galaxy Note7 and taking a 30% hit in operating profit

Samsung has reported a 30% decline in operating profit and a 7.4% decline in revenue for the third quarter, mainly due to the recall and scrapping of the Galaxy Note7.

Samsung recalled the Note7 in September after reports of overheating lithium-ion batteries, but when replacement phones developed similar problems, the company discontinued production in October.

Samsung said its mobile business saw earnings decrease “significantly” compared with the previous quarter due to the effects of the discontinuation of the Galaxy Note7.

However, the company said smartphone shipments remained solid due to continued stable sales of other devices such as the Galaxy S7 and S7 edge, and steady growth in the mid-tier Galaxy A and J series.

IDC figures support the claim. They show that Samsung remained the leader in the global smartphone market for the quarter despite the recall, accounting for 20% of all shipments in the quarter, followed by Apple (12.5.%) and Huawei (9.3%).

Looking ahead to the fourth quarter, Samsung said smartphone and tablet demand was forecast to increase during the year-end peak season. The company said it is expecting “solid sales” of the Galaxy S7 and S7 Edge, and it will maintain profitability in the mid-to-low-end segment through increased shipments of new models.

While the mobile division took a hit in the third quarter, Samsung reported growth in its components business, consumer electronics division, semi-conductor business and display panel division.

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In 2017, the company said it expected a turnaround with the launch of new flagship smartphones, noting that 2017 will also see the expansion of Samsung Pay roll-outs and cloud-related services, as well as the introduction of artificial intelligence offerings.

In the meantime, Samsung said its networks business expected to see continued improvement in profitability on the back of 4G LTE expansion in markets around the world.

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