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Samsung profit plunges after Note 7 recall

AAP logoAAP 27/10/2016

Samsung has reported its net profit for the third quarter fell by 16.8 per cent year- on-year, following the massive recall of Galaxy Note 7 smartphone last month.

The South Korean electronics giant reported a net profit of 4.54 trillion won $US4 billion ($A5.2 billion) in the July-September quarter, according to results on Thursday.

Total revenue fell 7.5 per cent to 47.8 trillion won.

On Monday, hundreds of South Korean Note7 smartphone owners filed a joint lawsuit against the company to seek compensation after the smartphone was discontinued.

The discontinuation of production is expected to cost Samsung 3.5 trillion won in operating profit from the fourth quarter of 2016 through the first quarter of 2017, Samsung said in a statement.

Samsung only began selling the phone in August, but said earlier this month it was discontinuing production following a global recall and a number of reports of the devices catching fire.

The $US940 Galaxy Note7 was aimed at the premium end of the market, where it was intended to compete with Apple's iPhone.

Samsung's earnings report on Thursday showed that while its mobile profit shrank dramatically, its components businesses, especially its high-density chips for computers and next-generation smartphone displays called OLEDs, performed well thanks to strong demand from global smartphone makers.

The component businesses generated more than 80 per cent of the company's quarterly income in the latest quarter, helping Samsung weather the cost of the handset recall.

Analysts expect those high-end components to be Samsung's growth engine next year as more smartphone makers adopt Samsung's OLEDs.

Anticipating strong growth in demand, Samsung said it will spend $US23.7 billion this year to increase production of OLEDs and an advanced chip.

Looking ahead, Samsung hinted that the worst may be over for its mobile division, forecasting that its mobile profit in the fourth quarter will likely be on a par with last year's.

Lacking a new high-end gadget to fight Apple's new iPhone, Samsung said it will introduce new mid to low-end handset models while selling the Galaxy S7 and S7 Edge smartphones, which were launched this year.

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