Samsung is reportedly planning to make some major changes to its smartphone supply chain in order to lower production costs and increase profits. The company will get rid of some of its suppliers responsible for assembling camera modules beginning next year.
Most of smartphone manufacturers rely on third-party suppliers for assembling the camera modules on their devices. With more and more smartphones now coming with triple or quad-camera setups on the back, the cost of assmebling those modules have gone up in recent years. This has hit the profitability for OEMs and Samsung is seemingly starting to feel that more now.
In 2019, camera module suppliers such as Mcnex, Partron and Powerlogics all posted over one trillion won in revenue. On the other hand, Samsung's smartphone business saw a drop in profit over the same period. The company is now mulling a change in the supply chain in hopes of increasing the profitabilty.
Samsung to assemble its smartphone camera modules on its own
According a new report by The Elec, Samsung will now abandon some of its camera module suppliers. Instead, the company will assemble a significant portion of the rear camera modules on its own. This will reduce manufacturing cost, thus increasing the profitability for the company.
This move, however, will reportedly affect Samsung's suppliers in different ways. Companies like Namuga and CoAsia, that primarily focus on front camera modules, are seeing this as an opportunity. With Samsung now planning to assemble the rear camera modules on its own, they are expecting more orders from the company for the front cameras.
On the other hand, companies like Mcnex will suffer a huge loss in revenue because of this change by Samsung. Mcnex has been reportedly assembling rear multi-camera modules for the South Korean behemoth. The company is now expecting lesser orders from the largest smartphone vendor in the world.
In addition, Samsung will also continue to diversify its suppliers for camera modules. For the Galaxy S20 FE, the company reportedly has tapped on Mcnex, Partron, Cammsys, Powerlogics, Namuga, and Sunny Optical of China as camera module suppliers. Samsung's own Electro-Mechanics division is also in the mix.
While competition among suppliers will lower the production costs, The Elec speculates that this move may result in camera defects as well. Nonetheless, Samsung has seemingly figured out a way to increase its profitability from the smartphone business. It remains to be seen if this change in supply chain will pass any benefits to consumers as well.