This column has been updated with Tuesday share price moves and details on Samsung's decision to permanently end Note 7 production.
In the course of about six weeks, Samsung's (SSNLF) Galaxy Note 7 fires have gone from being a product defect to a PR disaster to something that's arguably a one-of-a-kind train wreck for a major smartphone maker. Many suppliers are bound to feel the after-effects.
Less than a month after Samsung and the U.S. Consumer Product Safety Commission (CPSC) announced they were formally recalling roughly a million Note 7 phablets in response to numerous reports of the devices catching fire -- users could get either a refund or a replacement unit -- reports emerged that some of the replacement devices given by Samsung and its carrier partners to buyers have also gone up in flames.
In response, U.S. carriers began halting sales of all Note 7 units. On Monday morning, Samsung announced it's temporarily halting Note 7 production "in order to take further steps to ensure quality and safety matters." And just a day later, Samsung declared that it's permanently ending Note 7 production.
Considering the Note 7 is one of Samsung's flagship devices (along with the Galaxy S7), and that the phone's $800-plus price tag dwarfs that of most other Samsung models, this is a pretty big deal for the world's biggest smartphone maker. Even before reports of replacement units catching fire emerged, a SurveyMonkey poll found only 26% of Note 7 owners would get a refund and use the money to buy an iPhone. Meanwhile, 35% said they planned to keep the refund, and didn't specify how the money would be spent.
Drexel Hamilton's Brian White, a long-time Apple bull, estimated today the Note 7 disaster gives Apple the chance to sell "at least" 8 million additional iPhones this year. Google, which just launched its Pixel phones, could also benefit, as might other high-end Android phone vendors such as LG and Sony (SNE - Get Report) .
For Samsung suppliers, the damage at this point stems not only from lost Note 7 sales, but the impact the Note 7 fires will have on Samsung's brand and future device sales. Here, the fact that Samsung is relying on a third-party operating system (Android) that can be found on many rival devices hurts its ability to keep customers loyal.
At the same time, it's worth keeping in mind that many big Samsung chip suppliers also supply Apple and many of Samsung's Android rivals. Thus it's only those companies that have a disproportionate reliance on Samsung relative to other smartphone makers that are really at risk.
Maxim Integrated (MXIM - Get Report) , an analog/mixed-signal chipmaker that has long counted Samsung as its biggest mobile client, is one company that fits the bill. So is RF chip supplier Qorvo (QRVO - Get Report) , which has strong exposure to both the S7 and Note 7, and IDT (IDTI) , which supplies wireless charging receiver chips for Samsung phones. Maxim, Qorvo and IDT are down 5.2%, 1.9% and 6.9%, respectively, over the last two days.
Universal Display (OLED - Get Report) , which supplies materials for and licenses technology used by the OLED displays found on many Samsung phones, could also be affected. But it's worth keeping in mind that Universal's shares have rallied sharply this year thanks to widespread reports that next year's iPhones will feature OLED displays. That should limit the long-term impact of any Samsung share losses on Universal. Nonetheless, shares are down 4.3% over the last two days, with big Tuesday losses offsetting slight gains on Monday.
It's likely that a year from now, the furor over Samsung's Note 7 fiasco won't be as fresh on the minds of smartphone buyers as it is today. However, given the size of the mess, it's no longer the kind of thing the average consumer can be expected to quickly forget about. Especially when so many rivals will be offering perfectly good smartphones under brands that haven't been tainted by multiple recalls caused by flammable devices.