WOW! Samsung to compensate its partners for Note 7 inventory

_WOW!  Samsung to compensate its partners for Note 7 inventory Samsung Electronics has indicated that it will compensate its suppliers for Note 7 components that are in stock as it discontinues production of the device.  Not only will suppliers be compensated for finished and half-finished components, but suppliers of materials used to produce those components will also be reimbursed for their costs.

According to local Korean sources, 70 companies are involved, with a compensation fund of $267m, with the allocation for partially completed components being pro-rated based on production costs, down to raw materials.  Team Leader (Vice-President) Park Jong-seo of Samsung Electronics Wireless Business Department Purchasing Team stated, “We are sorry that we have caused financial trouble for our partners due to discontinuation of Galaxy Note 7.  We are going to prepare compensation as soon as possible in order to minimize difficulties for our partners as much as possible.”

The compensation does not however, cover the cost of component development, and the loss of revenue that were expected as part of the Note 7’s expected lifetime sales by suppliers, especially those who have developed components specifically for the Note 7.  These components, such as the iris scanner will not easily be incorporated in other customer products, and production facilities that were outfitted to build many of these items will likely be underutilized.  The hope among suppliers is that Samsung will help to utilize such production lines for new products.