As Samsung tries to keep up with competitors offering lower-cost products, such as Huawei and Xiaomi, the company has resorted to a serious plan to use China to make a fifth of its smartphone production next year.
The movement of Samsung, which closed last Chinese factory’s own smartphones in October, quietly, producing some phone models, “Galaxy Series” to contractors such as “Wing Tech”, and they are not known outside of China.
Samsung is not speaking out about the quantities to be transferred, but sources said the South Korean technology giant plans to ship about 60 million Chinese-made phones next year, out of a total of about 300 million devices.
WingTech and other OEMs are making phones for many brands, such as Huawei, Xiaomi and Oppo, in large quantities that allow them to keep costs low, and skilled contractors can quickly develop and produce new cheap phones.
But critics of Samsung’s strategy say it puts itself at risk of losing quality control, weakening its manufacturing expertise from outsourcing, and may even help competitors by giving contractors the extra size they need to further cut costs.
And Samsung is subject to another quality problem, it canceled its flagship model “Galaxy Note 7” in 2016 after reports that expensive phones are on fire, and also postponed the launch of its folding phone this year after the discovery of screen defects.
But with low-profit margins for cheap smartphones, people familiar with Samsung’s strategy say it has no choice but to follow the path of its competitors and resort to original designers to cut costs.
“This is a more inevitable strategy than a good strategy,” said a source familiar with Samsung’s operations in China.
The company said in a statement it was producing limited lines of smartphones outside its plants, to expand its existing portfolio and to “ensure effective management in the market.”
It declined to say how many Samsung phones were being produced by the original designers, saying future quantities had yet to be determined.