Android's best-selling smartphone manufacturer, Samsung, is reportedly ramping up its outsourcing efforts by increasing production through Chinese companies.
As first reported by South Korean tech media The Elec (via Android Authority), this move will see 25% of Samsung's smartphones produced by several original device manufacturers (ODMs) and joint device manufacturers (JDMs) in China this year.
People walk past the Samsung logo displayed on a glass door at the company's Seocho building in Seoul on July 28, 2022. Photo by JUNG YEON-JE/AFP via Getty Images
Why Is Samsung Outsourcing More Smartphones to China?
According to reports, Samsung's decision to outsource a major chunk of its smartphone production is driven by a need to cut costs and remain competitive in the budget phone market.
According to market analyst firm Canalys, Samsung now leads the 2024 smartphone market with a 20% share, driven by consumer optimism from the introduction of Galaxy AI, while Apple came in second with a 16% share, facing challenges in strategic markets such as China.
By leveraging the lower production costs in China, Samsung aims to deliver more affordable smartphones to its customers. This strategy, however, raises concerns about the potential impact on quality and design.
Samsung Aims to Produce 270 Million Smartphones This Year
While rival Apple has been slowly moving its production away from China in recent years to establish new factories in India and Southeast Asia, Samsung is doubling down on Chinese smartphone makers.
This year, Samsung plans to increase its production through Chinese ODMs and JDMs from 44 million units last year to 67 million units. This increase represents a substantial rise from the 6-7% of Samsung's total production that was outsourced to ODMs up until 2019.
Samsung aims to produce 270 million smartphones in 2024, with outsourced units accounting for 25% of this production goal.
Chinese manufacturers, including Wingtech, Hwaqin, and Longcheer, will handle a significant portion of Samsung's production, with Wingtech producing 10-11 million units, Hwaqin 5 million units, and Longcheer 3 million units..
In addition to Chinese manufacturers, Samsung will also outsource 28 million units to factories in Vietnam, specifically to Hansol Technics and Dreamtech, which have previously handled Samsung's production.
Android Authority tells us that Samsung's outsourcing strategy has been evolving since 2019, when the company first began using ODMs to cut costs for its budget phones.
The decision to significantly increase outsourcing in 2024 continues this trend, aiming to enhance the company's competitive edge in the affordable smartphone market.
This move predominantly affects the production of Samsung's budget smartphones. High-end models will continue to be produced in-house to maintain the company's standards for quality and design.
Examples of outsourced models include the Samsung Galaxy A03s, which have been noted for their good battery life but have been criticized for their cheaper construction and laggy performance.
By outsourcing to ODMs and JDMs, Samsung collaborates closely with these manufacturers. While ODMs take on both product design and parts procurement, JDMs involve Samsung in the design process and parts procurement, allowing the company to retain some control over production.
