How Samsung’s recent product malfunctions will impact Austin facility

FILE - In this July 28, 2016, file photo, a color blending feature of the Galaxy Note 7 is demonstrated in New York. An overheated Samsung device created smoke that caused a plane to be evacuated at Louisville International Airport on Wednesday, Oct. 5, 2016 an official said. The smoke prompted Southwest Airlines to evacuate the plane before it departed for Baltimore, Louisville Metro Arson Capt. Kevin Fletcher told news outlets. (AP Photo/Richard Drew, File)
FILE - In this July 28, 2016, file photo, a color blending feature of the Galaxy Note 7 is demonstrated in New York. An overheated Samsung device created smoke that caused a plane to be evacuated at Louisville International Airport on Wednesday, Oct. 5, 2016 an official said. The smoke prompted Southwest Airlines to evacuate the plane before it departed for Baltimore, Louisville Metro Arson Capt. Kevin Fletcher told news outlets. (AP Photo/Richard Drew, File)

AUSTIN (KXAN) — Samsung is done with the Galaxy Note 7 phone.

Last month, it recalled millions of the phones after some caught fire. Then, batteries in the replacement phones started exploding.

The Samsung facility in Austin makes components for all of the company’s smart phones. KXAN’s John Dabkovich talked to a tech industry analyst to get an in-depth look at the possible fallout for local workers.

Patrick Moorhead says, “The bigger picture here is how Samsung deals with the problem, which could affect products that are manufactured here in Austin.”

Q: When you say ‘how Samsung deals with it,’ what do you mean by that?

A: The reality is with any complex products, whether it’s electronics like phones or TVs and even cars, everybody has recalls. It’s how you deal with the recall not the recall itself. So, Samsung needs to be very careful in what they say going forward.”

Q: Basically, if they taint the entire brand that’s when we could see an effect here in Austin?

A: That’s exactly right. Here in Austin they make processors and memory that are in a lot of different devices. Overall, if the Samsung brand is tarnished, that impacts the demand for products that are made here in Austin.

Q: By basically punting on this line of smartphones, can you put a dollar amount on the cost to the company?

A: The biggest expense is for phones they’ve made already today. So, overall you’re looking to Samsung at about $5.7 billion. It’s a little harder to tell here in Austin. Samsung likes to protect their privacy and confidentiality. So, we don’t know exactly — specifically the part that they make here.

Moorhead says Samsung is strong enough to take that kind of hit to its balance sheet. Still, the stock closed down almost eight percent Tuesday, wiping away an estimated $18 billion of the company’s total value.

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