Samsung Electronics Co.’s decision to discontinue production of the Galaxy Note 7 has taken a heavy toll on its major phone parts suppliers and sister companies Samsung SDI Co. and Samsung Electro-Mechanics Co.

Samsung SDI said in a regulatory filing Thursday that it posted a net loss of 35.2 billion won ($30.7 million) in the third quarter ended September, swinging to a loss from a year ago. It also reported an operating loss of 110.4 billion won in the quarter, widening losses by 130.7 percent from a year earlier and worse than the market estimate of a 45 billion won operating loss. Sales dipped 2.3 percent to 1.29 trillion won over the same period.

Reflecting the debacle of the Galaxy Note 7 whose production was discontinued due to battery defect blamed for causing fire to the device, sales of its small-sized lithium-ion batteries have remained poor. Its large-sized lithium-ion batteries for electric vehicles (EVs) didn’t fare well either, weighed down by lingering uncertainties over whether the company would be able to get EV battery certification from the Chinese government, which is pivotal to do business in the world’s largest EV vehicle market.

Park Kang-ho, an analyst at Daishin Securities Co. said there are no immediate signs of recovery in Samsung SDI’s profitability due to sluggish sales of both small- and mid-to-large-sized batteries, and uncertainties over China’s awarding of EV battery certification will likely further add woes.

As part of efforts to soothe worried investors, Samsung SDI announced at a shareholders’ meeting held on Thursday that it has decided to buy back around 300 billion won worth of the company shares that could raise shareholders’ value.

Samsung Electro-Mechanics, which supplies various smartphone parts like substrates and camera modules to Samsung Electronics also was hard hit by the Galaxy Note 7 setback. According to the company, its operating profit plunged 87.4 percent to 12.8 billion won in the third quarter from a year ago, way below the market consensus of 32.1 billion won.

Lee Jeong, an analyst at Eugene Investment & Securities Co. said the company’s outlook for the next quarter is also bleak as smartphone makers would try to cut unit cost to make up for dented profitability amid slowing demand.

By Lee Yong-gun

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