Samsung's mobile division hasn't really been minting money. Its profits were almost a billion dollars less in Q3 2018 than they were in the same period last year. The company is having to deal with increased competition in all segments of the market.
In what may be a bid to improve its margins on smartphones, Samsung will reportedly be sourcing more components from China starting with the Galaxy S10. Camera lenses and antenna parts are likely to be what it sources from Chinese suppliers for its next flagship smartphone.
Sourcing more parts from China to improve margins
This is viewed as a strategic call on Samsung's part to cut costs in order to limit the decline in earnings from the mobile division by improving margins. Industry watchers suggest that Samsung has signed up several Chinese companies as vendors in recent months.
The decision to go with these Chinese suppliers is reportedly based on two major factors. Not only are they cheaper but their components have now become technologically viable for Samsung. The company can use them in its flagship products without any quality or yield concerns.
The report also mentions that some of these companies are already supplying a small amount of components for a few low and mid-range Samsung smartphones currently being mass produced. The Galaxy S10 would be the first flagship that Samsung sources antenna parts from China for. The antennas for Near Field Communication, Magnetic Secure Transmission and Wireless Power Consortium power mobile payments and wireless charging.
Samsung previously used to source these components from a sister company called Samsung Electro-Mechanics. South Korean component manufacturing company Amotech was also a supplier for these antennas. Its said to get hit the hardest by this change because Samsung will split orders between its sister company and the Chinese suppliers. This would leave Amotech out of the supply chain.
Just how big of a difference will this make to Samsung's bottom line remains to be seen. The company must have projected significant cost savings to consider switching up its supply chain for a flagship device.
