Samsung uses their components business as a weapon against competition

May 27, 2013

    Samsung Logo 645px

    So often, we decry Samsung for being proprietary. Their TouchWiz, apps, and services are all very much geared toward people buying Samsung devices. This isn’t wrong or nefarious, it’s just not what we’d like to see from such a well known brand. Android is proudly open source, and the development community is phenomenal to keep it that way.

    While software is subjective to taste, hardware is a different story. Consumers will gravitate to what works best for them. The HTC One may be too good to pass up for many, whether or not you like Sense. Samsung’s plastic builds come under heavy scrutiny, leaving space in the market for variety. What we don’t see is how those devices come together, and the difficulties that device makers can come across in the process of getting their wares to market.

    Jack Tong, president of HTC North Asia, recently told a story of such difficulties. In 2010, their HTC Desire was well received by fans and media alike. That handset was using an AMOLED screen, manufactured by Samsung. Accordingly, Samsung then refused to supply the display. While the reasons aren’t known, Mr. Tong said “We found that key component supply can be used as a competitive weapon.”

    Samsung island

    Samsung is a very comprehensive company, controlling every aspect of the hardware process. They manufacture about 90% of the components they use, a big reason they can readily saturate the market with devices. In being the leader in manufacturing, they can also demand the price they want to see. Their ongoing battle with Apple took another sour turn when they began charging a premium for a chipset Apple had long purchased for them. There was a sudden and uncalled for 20% markup for the hardware, and Apple simply had to pay it to continue selling hardware.

    If Samsung had Apple in a bind, HTC was in a chokehold. By refusing to supply the display to them for the Desire, Samsung had monopolized the market. Eliminating competition by means of controlling supply, thus eliminating demand from consumers, is vicious. Samsung can, and will, do as they please.

    samsung galaxy s4 diamond pixels

    Solutions

    It’s probably true that much of your device, regardless of make or model, is full of Samsung. As a leader in hardware manufacturing for mobile devices, they supply components to every device manufacturer there is. This sets a dangerous standard; not for quality, but for pricing. Samsung has proved they will either charge a premium of eliminate supply altogether, making for a near monopoly that can’t easily be regulated. If a contract has language that allows for it, and there is nobody else to get manufacturers their goods, the world is subject to Samsung’s whims. In the fast moving world of mobile technology, there is little reason for manufacturers to fight this with a drawn out court case.

    The Taiwanese Ministry of Economic Affairs is trying to change the landscape of component manufacturing, focussing on displays. They are currently in the process of urging AMOLED makers to relocate to Taiwan, allowing a closer relationship with manufacturers. HTC, Asus, and Acer are all Taiwanese companies. They also have the added benefit of being well established and respected device makers.

    It’s in everyone’s best interest for more competition, really. It creates more avenues for lower cost devices, and that’s good for consumers. As the Chinese mobile market heats up, the desire for those low cost devices is paramount. More jobs would be created in Taiwan, and having your component manufacturers in your back yard makes for better relations.

    We don’t know how prevalent this is, but it’s troubling. Without pointing a finger directly at Samsung as the only culprit, they are the only one we’ve heard of doing this. There have been manufacturing slowdowns, like the issues HTC faced with the One, but those are not due to a supplier playing hardball. The more avenues manufacturers have for great components, the better and cheaper our devices will be.

    Comments

    • bad_kid_sid

      sammy has become a very big fish in electronic field n specially in mobile market.. too much power in one single company is never good for business n specially competition.

      • jusephe

        Without competition, there is no innovation.

        • bad_kid_sid

          ya.. thats wat i m sayin..

        • Lowry Brooks

          Ya. True. But Samsung IS the innovator that everyone’s following now, not Apple…

      • IHATEHIPSTERSSS

        In LG we trust.

        • bad_kid_sid

          Lg is a copy cat of sammy.. Samsung makes a device n Lg copies it, good phones widout features n no proper update tracks.

    • 윌 스튜어트

      Gosh, the best comment on this article is brilliant: http://m.androidauthority.com/samsung-processor-price-bump-130419/

      • Topcat488

        If Apple or any other firm don’t like the prices, they should build their own factories… They, Apple, have enough money to do that… Stop crying.

        • 윌 스튜어트

          Read the best comment on that article, I’m not some itroll..

          • Topcat488

            Sir, i wasn’t implying anything bad about you at all, sorry if you misunderstood me. I meant that Apple need to build their own factories, and stop relying on others… I’ve heard that a factory in Texas is being built for Apple for something, but it’s a start. I saw the best comment on the article you posted, and i believe it could be possible that Samsung needed the parts for itself.

    • Google News brought me here

      Samsung is evil!!!!

      Run, Forrest, run… to buy a HTC One to protect the world!!!!

      • Topcat488

        Lets see now, HTC One have sold a little over 5 million devices so far… From that they pay Microsoft their fees, Apple their $8.00 per phone, and now Nokia wants to ban them in the U. S…. Yeah ya better run fast Forrest.

        • Cao Meo

          I’m sure HTC is doing well, and last year crushing defeat in flagship war will not happen again.

          HTC sold 5M, Samsung 10. But Samsung Electronics is 30 times bigger than HTC so this is HTC huge victory, even w/o considering Samsung enormous ad spending.

          Better still, One’s sales has reach a critical number and from now on words of mouth will work for HTC because beautiful design is One’s best advertisement.

          • John Mortimer

            No Samsung sold 10m in Less than 30 days and HTC sold 5m up to the time they said, way more time than 30 Days

    • On a Clear Day

      Well, as far as charging Apple 20 percent more as allowed by the contract Apple agreed to – couldn’t have happen to a nicer company!

      If I were Samsung and Apple had as the did and are doing used every nasty trick in the legal books possible to derail me, and I could mark up all their components based on their agreement 200 percent I would. What’s sauce for the goose is good for the gander.

      Re HTC’s screens: If they did, and we do not know for sure do we?, hold the HTC Desire essentially hostage by not supplying the screens – well that’s not nice and somebody responsible at Samsung for the company’s integrity should make heads roll because of it. However, who knows if that is what happened.

      Seems to me that the focus of this article – at least the underpinnings of it – are a tad on the weak side; the title suggests we are going to find revealed chicanery or wanton monopolistic doings, right there in Seoul”.

      Instead, we learn of only two facts – one re Apple – that probably made most people here reading it smile or laugh with “serves the SOB’S right” delight and another that was only conjecture about a possible transgression that even the wronged party gave a water down, nothing characterization to.

      Methinks this is not one of the better, most useful articles I’ve read on Android Authority.

    • Tim Box

      Can we have citations to the pre-ported facts in this article? The Price hike levied on Apple was found to be rubbish in the last article I saw on the subject. The prices are agreed well in advance so you cannot just put the price up as this article suggests.
      Also when you go into a contract with a company for parts you cannot just “refuse to supply the display”.

    • flamencoguy

      I say it is a defensive weapon. As it has been sued relentlessly by Apple.
      It has finally decided to do something about it. Good for them.
      Now we’ll see who is the real innovator and who is a pretend innovator.
      Apple just buys components. Samsung invents them and makes them.
      Say something meaningful folks instead of one simple one liners. And “ya’
      “Methinks”, “duh” and all that childish stuff !

      • On a Clear Day

        I think highly of you too. The English language is one of the richest vocabulary wise – possibly the richest at around 800,000 to a million words – of any language. If you wish to write copy that is stylistically absent, that is your prerogative; if you don’t like the style of someone else – simple cure – don’t read it; end of problem.

      • NTD

        I do think Apple suing Samsung had a big part as well as Apple going off to TSMC. It is bad contract management to leave room for the vendor to raise prices on a whim. I suspect what happened is when Apple violated an exclusive clause, then Samsung was allowed to charge more. That’s just business…. No one is going to cry for Apple’s profits…

        NTD

    • simpleas

      Nah, only online blogs cry about metal, in the real world, samsung sells billions. Samsung gives users what they want, and updates often. Kudos to Sammy!

    • steve “blow” jobs

      crapple started it and now Samsung is going to finish it. htcrap is going and should go down as they sold out to crapple.
      SAMSUNG 4 EVER !!!!!!!!!!

      • Cao Meo

        I also did not like it when HTC signed pact with Apple, but all is forgiven when they released One.

        HTC is offering a new choice for Android: beautiful premium design next to boring Samsung’s products.

        • Lowry Brooks

          Boring yet it sold 10 million units in the first month.
          Samsung hater much…..

          • Cao Meo

            GS4 certainly has its strengths too, so there’s a lot of choices in Android. There’s always been plastics and now we have new choice: All metal design.

            • Lowry Brooks

              I see your point.

    • cycad007

      Samsung as a company sucks…yes, I’ll admit they can make great products. But the reason I’ll never purchase their products directly (indirectly…I unfortunately don’t have a choice) is because of their anti-competitive behavior and their willingness to do “evil” things to screw their customers (both companies and the public) to make a few bucks. Samsung….Go F*** youself!

    • Cornstarch

      There’s other manufacturer of display also: Lg, Sony, Sharp and other smaller companies. They too make smartphone and can charge any price for their technology

    • megadon

      And let HTC take credit for Samsung innovations? Is that what you want Swanner? Well if so, that is a messed world we live in, where the innovators are not referenced and the plagiarizer is lionized by the world over.

    • Cao Meo

      OEMs have learned not to buy products that Samsung has control of the market. OLED is one example. Samsung has tried to sell other companies different components to make up for the loss of Apple orders.

      So behaving like a monopoly will not help Sammy in that regard and even splitting the components business into a different company can’t help when there’ no trust.

    • Herman Munster

      OMG, You must have your head in the sand. If you’re going to write an article about playing hardball, you better get all your facts together. First of all, the company that’s throwing their weight around is Apple. They keep everyone tied up in patent courts, then in the case of HTC, they told them, if they were going to continue selling the HTC they will have to Pay Apple $6-$8 Per Android Phone as Part of Patent Settlement. So who’s using dirty pool to slow down the competition? And Apple fans seem to believe Apple is not in the wrong for slowing down the progression of technology by claiming to own the rights to simple design features they themselves don’t own the rights to.
      In the case of Samsung upping the price of its chips to Apple, well Apple shouldn’t be suing Samsung for patent infringement if they want to remain in good standing with one of their major suppliers of hardware. Not only that but Apple had to go to Samsung to supply it with 9.7″ displays for the new iPad after LG Display and Sharp Corp. failed to meet Apple’s quality requirements.
      Samsung should have turned them down, but I’m sure Apple paid well for their behavior.

    • William Worlde

      Although this article is just about dead at ~20 hours old, this article incensed me enough that I thought I’d still add my say.

      Why shouldn’t Samsung do what they want they want with their property?! ***They are not just a supplier of raw products, they make finished products too.*** Apple and MS hold their cards close to their chests; if they don’t like what a competitive supplier is doing, then let them manufacture their own parts!

      Now, if you wanted to compare prices on the finished products, then that would be a discussion. You’d think if Apple has to sell its iP at ~$650 (to make a +150% profit!) and they are buying parts from Samsung, then Samsung should be able to sell their devices much cheaper since they’re manufacturing said parts for their own systems! But, if consumers are willing to fork over $600-$700 then why not charge them that?!

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