Samsung has already crashed out of China. It’s also facing a decline in India, the world’s second largest smartphone market. Chinese smartphone vendors like Xiaomi and Huawei are easily the biggest reason for Samsung’s declining market share.
Now, the company seems to have a new plan to revive growth and reclaim lost glory. A new Reuters report claims that Samsung is planning to outsource a large chunk of its smartphone manufacturing duties to a Chinese original device manufacturer (ODM).
In a bid to cut costs and lower prices, Samsung is reportedly planning to outsource a fifth of its smartphone production to Wingtech. This means that Samsung will no longer be making those phones in-house and Wingtech will take up production as well as design duties. Wingtech also manufactures devices for the likes of Xiaomi and Huawei, the two companies Samsung plans to take on with this move.
Citing sources, Reuters reports that Samsung plans to ship 60 million ODM-made smartphones next year, out of a total target of 300 million devices. That’s a sizeable 20% of the company’s total smartphone inventory.
Survival of the fittest
“This is an inevitable strategy rather than a good strategy,” a source with knowledge of Samsung’s Chinese operations told Reuters.
Wingtech could shave off component cost by almost 30% for Samsung. This would make it possible for the company to pass down the benefits to consumers in the form of cheaper devices.
The new outsourcing strategy will be targeted at mid-to-budget Galaxy A-series smartphones. These Wingtech-made phones will primarily be sold in Southeast Asia and South America. It’s safe to assume Samsung is targeting countries like India where it’s clearly losing ground.
Samsung is also hoping to take advantage of Huawei’s US trade ban to push out cheaper devices, complete with Google services.
Should consumers worry?
“It is crucial to cut costs to maintain competitiveness with Huawei and other Chinese handset makers,” a Samsung insider told Reuters. However, cutting costs could mean lowering the quality of devices.
Samsung told Reuters that it will keep a strict oversight on quality and design. However, a person familiar with Chinese ODMs told the outlet that these companies tend to cut steps out of the manufacturing process, potentially lowering the quality of phones.
It could also be argued that everyone from Xiaomi to Apple relies on third-party manufacturers, so why shouldn’t Samsung do so too? The only thing it needs to ensure is to keep a tight leash on whoever makes its phones.
Samsung currently manufactures most of its smartphone inventory in Vietnam and India. Some of its phones, like the Galaxy A6S in China, are made by ODMs though.
If expanding the ODM strategy works out for the company, it could further bolster its ability to release more devices across price segments.