Korean electronics giant, Samsung is currently the world’s largest smartphone brand. However, it is facing tough competition from Chinese smartphone makers like Huawei, Xiaomi and BBK electronics. In order to sustain the deluge of aggressively priced handsets originating from China, Samsung is relying on giving more orders to its ODM partners.
According to a Korea-based Newsis News Agency report, in the year 2020, about 60 million units or 20% of smartphone that Samsung is predicted to sell will be manufactured by its ODM partners in China. In comparison, ODM produced units sold by Samsung in the year 2019 will only be 30-40 million, about 10% of overall sales.
The Korean company started giving ODM orders to China-based Wingtech Group in September 2018 and expanded its outsourcing by adding Huaqin Telecom Technology as its new partner in July 2019, the report added.
What is an ODM?
An ODM (original design manufacturer) is a company that takes the original specifications of another company or individual and builds the design to the product specifications. ODMs make it possible for a company to get a product to market without having to completely design the hardware and without investing in production facilities.
The ODM supplies manufacturing capacity. The company that created the specification typically retains ownership of the design. Both the Samsung Galaxy A10s and Galaxy A10 are examples of ODM smartphones.
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While Samsung continues to flourish in the flagship smartphone segment, previously mentioned Chinese smartphone makers have been eating up Samsung’s market share in the budget segment at a rapid rate. Due to cut-throat competition, profit margins in the entry-level segment are considerably low in comparison to high-end devices, which is where Samsung would want to channelise most of its energy.
Having said that, these low profit returning smartphones make up a large percentage of overall sales and Samsung cannot skip on this segment completely. Subsequently, with ODM smartphones that would ideally require a limited amount of resources from Samsung, the company can continue to focus on premium devices which is where the profits are.
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