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Author Topic: Samsung to use Chinese ODM to design 60 million phones next year  (Read 11667 times)

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Samsung to use Chinese ODM to design 60 million phones next year
« on: November 18, 2019, 10:18:59 PM »

Looking to lower the manufacturing costs of some of its handsets, Reuters reports that Samsung plans on outsourcing the production of some Galaxy A handsets to a Chinese original design manufacturer (ODM) named Wingtech. Samsung closed its production facilities in China last month and by relying on Wingtech to assemble these phones, the company hopes to reduce the cost to manufacture low-end handsets; this will allow it to cut retail prices in certain regions including India, the second-largest smartphone market in the world. But since it is a developing country, consumers are very mindful of a handset's price which is why value for money manufacturers like Xiaomi are doing well in that country.
20% of Samsung's 2020 phone production could come from Wingtech

Phones produced by Wingtech will reportedly be shipped to Southeast Asia and South America. Besides Xiaomi, Samsung is expected to take business away from Huawei. Due to its U.S. supply chain ban, the latter cannot ship new phones using the Google Play services version of Android. Huawei's phones in the aforementioned markets will be powered by an open-source version of Android and won't be able to use Google's core Android apps like the Play Store, Search, YouTube, Gmail, Maps and others. This might not matter inside China, but outside of the country it is a big deal. A Samsung insider who wished to remain anonymous says, "It is crucial to cut costs to maintain competitiveness with Huawei and other Chinese handset makers."

Sources cited by Reuters say that Samsung plans on shipping 60 million handsets out of China, about one-fifth of the 300 million units it expects to roll off of the assembly line in 2020. But the report also mentions some of the risks that Samsung faces by using an ODM. Perhaps the biggest gamble is that Samsung will lose control over the quality of the phones being manufactured. And the strategy could backfire because Wingtech also produces handsets for Xiaomi; any economies of scale that Wingtech realizes from taking Samsung on as a customer could result in lower pricing for Xiaomi phones as well. Samsung says that it will apply the same quality testing and standards to the models made in China. The company says that it is committed to making high-quality units in the country.


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