There are reasons why an established tech brand might rely on an ODM to design and create products that it can sell. In the case of Samsung, the company has had its struggles selling its smartphones in China. But for the past couple of years, though, it has increased its reliance on domestic ODMs to attract more sales in the country — so much so, market watchers expect Samsung to sell tens of millions of phones it did not itself make.
South Korean industry sources estimate that Samsung will ship up to 40 million Chinese original-device-manufacturer-made phones out of a total of about 300 million this year, The Electronic Times reports. IHS Markit is a little more conservative, estimating that ODM models will make up 8% of shipments — but that’s up from 3% last year.
Samsung said in a statement that it utilizes ODMs in some countries to allow for more efficient management, to better meet local demand for features, and to cut down costs. The Times specifically points out last year’s Galaxy A6s, sold only in China, being made by a Chinese firm called Wingtech. Similarly, the Galaxy A60, which hasn’t made much headway out of China, was designed and manufactured by another Chinese ODM. Furthermore, Samsung is said to have recruited another company named Huaqin for future ODM contracts.
The flip side of the coin to acknowledge is that South Korean component makers are struggling to keep business relationships with Samsung and LG, which has opted to outsource parts and processes to China, Vietnam, and other South Asian countries, or are interfacing with Chinese or Vietnamese ODMs directly.
Of course, for every corner cut, smartphone brands are pouring tons into research and development to determine new features that could draw consumer attention and, perhaps, their limited buying power. We’ll see if Samsung has struck the right balance this past quarter as it reports earnings tomorrow.