Over the last couple of years, Samsung has been facing stiff competition from Chinese smartphone manufacturers like Xiaomi and Huawei, especially in the budget/mid-range segment. Even though Samsung offers some pretty compelling devices in this price segment, its smartphones are typically more expensive than those from Chinese manufacturers. This has resulted in a significant drop in market share for the company in emerging markets like India. In order to price its devices more competitively, Samsung is now planning to outsource a fifth of its smartphone production to China.
According to a recent report from Reuters, the company is moving the production of some of its Galaxy A models to original design manufacturers (ODMs) like Wingtech in China. While Samsung hasn’t revealed the exact details, sources reveal that the company plans to ship around 60 million phones made in China next year, out of a total of about 300 million devices. ODMs like Wingtech make phones for multiple brands like Huawei, Xiaomi and Oppo and the increased level of production allows them to keep costs down and produce phones quickly.
While the move could help Samsung lower the price of some of its devices, the strategy could result in the company losing control of the quality of its devices. Critics also suggest that the strategy could help ODMs further reduce costs due to the additional volume, helping Samsung’s rivals in the process. Be that as it may, Samsung has little choice but to follow rivals and rely on Chinese ODMs if it wants to remain competitive. In a statement to Reuters, Samsung said that it has been making limited lines of smartphones outside of its own plants to widen its existing portfolio and “ensure efficient management in the market”.
Samsung devices manufactured by ODMs will primarily be sold in Southeast Asia and South America, according to a source familiar with the matter. It’s worth noting that Samsung isn’t the only non-Chinese manufacturer to rely on ODMs for its devices. Apple also outsources production to Taiwan’s Foxconn Technology, which has factories in China. However, Apple retains complete control over the design over its devices. On the other hand, Samsung’s ODM Wingtech has a hand in both the design and production of its devices, sources said. Samsung has assured that it has applied the same quality checks and standards it does with all its devices, and it’s committed to delivering high-quality products.
Source: Reuters
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