Samsung to outsource a fifth of its smartphone production to Chinese ODMs, report says

Samsung will be selling these Galaxy smartphones made by a third-party ODM in Southeast Asia and Brazil. The company says its ODMs devices will have the same quality as the phones manufactured by Samsung. However, some fear that the change in strategy could lead to quality control of these devices.

Rivals with low priced smartphones, predominantly from mainland China, are putting pressure on Samsung. The company’s market share in India saw a steep decline in the last quarter. According to research firm IDC, Samsung had a market share of 18.9 per cent in the third quarter of 2019. Xiaomi still leads the Indian smartphone market with a market share of 27.1 per cent. For Samsung, India is a critical market and if it performs below expectations, it might have a negative impact on the company’s smartphone business in the long run. Samsung operates the world’s largest smartphone factory in India, which it opened last year.

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Other than India, Samsung is also losing market share in China, the world’s largest smartphone market. Samsung’s market share shark to 1 per cent in China in the first quarter of 2019. The company recently announced that it would shut its last remaining factory in China.

The strategy behind outsourcing some of the production to ODMs to save cost. Given margins are slim in the budget and low-end smartphone segment, Samsung has left with no choice but to start outsourcing the production to third-party ODMs like Wingtech. One source claimed that Wintech is able to secure some components for up to 30 per cent less than what Samsung would pay in Vietnam, where the company operates three factories.

For now, though, Samsung has no plans to outsource its high-end devices to third-party ODMs in China. It will continue to manufacture devices like the Galaxy S10 and Galaxy Note 10 in Vietnam and India.