Samsung make much more than the Galaxy Android smartphone; they also manufacturer smartphone and tablet components including industry-leading System-on-Chips (SoCs), memory chips and AMOLED panels. These particular components are amongst the best in the industry and as such, device manufacturers wishing to use Samsung parts have to pay a premium price. Of course, Samsung manufacture their own smartphones and tablets and these devices have absorbed much of the component production, but we are seeing signs that as Samsung mobile sales fall, other business units have continued manufacturing components. This has led to inventory levels building – in other words, Samsung has a warehouse (or three) full of unsold Exynos processors, AMOLED panels and memory chips. There have been persistent rumors that Samsung is set to reduce prices to original equipment manufacturers and increase the supply of parts and components at more competitive prices in the third quarter. It is believed that Samsung has recently allocated almost half of its OLED panel production capacity to providing panels for the Chinese smartphone manufacturers.
In recent years, Samsung has been less eager to sell its own memory chips, processors and AMOLEDs to competitors, instead keeping these products as Samsung-branded smartphone and tablet exclusives. We have seen a small number of manufacturers using Samsung components, but often the product used in a competitor smartphone or tablet is inferior to the headline product used in the comparable Samsung flagship device. Samsung may be facing the difficult decision between giving competitors access to their flagship components or winding down factories to reduce manufacturing capacity. Samsung, however, are no stranger to the component manufacturing business, having been a contractor for Apple processors until comparatively recently.
A decision to manufacturer and release components into the wider device market has echoes of a similar decision across at Sony, where the business is tapping investors for capital to expand its global sensor business. Sony too is struggling to sell devices in a competitive market. Later this year, Google's Project Ara, the modular smartphone, may well shake up the industry further and perhaps Samsung will release Ara boards containing the Exynos 7420 processor, which could be combined with a Sony camera board and an LG battery. Yes, these components will likely be expensive, but could result in a device having the very best that an industry has to offer under a Google or Project Ara badge.