Samsung to Chase Higher Profitability by Outsourcing Manufacturing of Lower-End Devices

Samsung Low end devices

Apparently, in a move to chase higher profitability, Samsung will begin to outsource the production of the lower end Galaxy devices, and focus itself on making the more premium ones. That means they are going to let other companies build low-end devices with their brand on them, and they’ll just get some licensing fee from the brand out of it, while they will also be helping push the devices to carriers all over the world. This may or may not be a good thing, depending on how well those companies will build Samsung’s devices, and whether they will hurt Samsung’s already very diluted Galaxy branding or not.

I’ve started noticing that Samsung has been focusing a lot more on profitability over the past year or so, and some of the hints were for example that they released the 1280×800 Galaxy Note 8.0 for $400, even though they knew we were about to get a new ~$200 Nexus 7 with a higher 1920×1200 resolution.

They started selling the Galaxy Gear at $300, even though it was pretty obvious that was a high price for it, hinted also by the fact that they were offering it for $200 if you were buying it with a Galaxy Note 3, which meant it’s likely the watch was profitable even at $200 by itself (I doubt they would want to hurt the Note 3’s profitability).

They released the Galaxy Note 10.1 at $600, which while it was 32 GB by default, it shouldn’t have cost more than $500 a year after Nexus 10 was being sold for $400. They also started selling the 16 GB Galaxy S4 unlocked for $650, while the HTC One was being sold for $600 with 32 GB of storage, and HTC isn’t even one of the companies that prices its products competitively on price, usually.

We could also add the fact that Samsung is trying to region-lock devices, so others can’t sell the devices at lower prices than their carrier or retail partners in other countries, which I think is a very anti-consumer move, because they are helping certain partners keep prices higher in their countries.

So I think there’s a clear trend here of Samsung trying to take full advantage of its already pretty known brands, and try to squeeze as much cash out of that as possible, even if the specs/value ratio doesn’t look that good to a consumer. But Samsung’s bet is that most consumers buy stuff by branding, not necessarily by what’s inside, and that this will allow them to make a lot of money without having to absolutely beat the competition on specs offered for the price.