Samsung is facing costs as high as $1bn to recall and replace the 2.5 million Galaxy Note 7 devices it has so far shipped and sold, in a major blow to the firm.
Samsung said on Friday that it will recall all devices and stop selling the phone while it investigates claims that at least 36 handsets had caught fire and exploded owing to faulty batteries.
Now, Bloomberg has said that the cost will be $1bn based on analyst estimates, although Samsung executives would only go on record as saying that it is a "heartbreaking figure".
The timing is terrible for the firm, as it comes in the week that Apple releases its iPhone 7 device. Samsung is clearly worried that disgruntled customers will leave for its rival, and is offering $25 to US consumers who trade in their Note 7 for another Samsung device.
It is unclear whether the same offer will apply in the UK. V3 has contacted the company for confirmation but has not yet received a reply.
Samsung was forced to take action last week after widespread reports of problems with the Note 7.
"In response to recently reported cases of the new Galaxy Note7, we conducted a thorough investigation and found a battery cell issue," the company said at the time.
Samsung said that it has been informed of 35 cases of the handset catching fire, and is working with suppliers to find as many of the affected batteries as possible.
"Because our customers’ safety is an absolute priority at Samsung, we have stopped sales of the Galaxy Note 7," the firm added.
Additionally, Samsung will offer a voluntarily replacement of the device with a new one "over the coming weeks" to reduce the risk of anyone else being affected by the fault.
This is our statement on Galaxy Note7 https://t.co/xjOuejNqIG— Samsung Electronics (@SamsungNewsroom) 2 September 2016
Samsung noted the "inconvenience" that the incident may cause to customers, but for the company it is far more than that. The Note 7 is one of its top devices, and the decision to stop sales will have a huge financial impact on the company.
Furthermore, Apple is gearing up to launch the iPhone 7 in just a week's time and many potential customers may well be put off by Samsung's problems and plump for a phone from its rival.
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