Samsung made a shift toward the ODM strategy for some of its low-end devices not too long ago. It did that in order to cut down costs so that these phones could be priced more aggressively. The company was expected to launch several ODM models this year but its plans were disrupted by COVID 19.
The production lines for these devices were shut down when the pandemic hit. It has taken some time to get the supply chain and the manufacturing process up and running again. Now, Samsung’s ODM partners in China are once again manufacturing its phones.
Samsung’s ODM vision suffers due to production bottlenecks
The ODM strategy for low-end devices is favored by TM Roh who took over as the head of Samsung’s mobile division earlier this year. Samsung doesn’t manufacture these devices at its own facilities. It only designs them while they’re made by third-party manufacturers in China.
This helps the company to significantly cut costs and thus offer these low-end devices at very attractive prices. Samsung has been competing with Chinese manufacturers in this segment and this strategy is one of the ways it’s looking to counter their influence.
The Galaxy M01s is Samsung’s latest ODM smartphone. Announced in June, this ~$130 entry-level device is manufactured by Wingtech in China. Production of this handset has now resumed. However, the pandemic has forced Samsung to revised its production targets for its ODM lineup. The company previously wanted to ship as many as 60 million ODM smartphones in 2020, but now plans to ship between 24 and 26 million units.
Samsung’s distributors had actually been witnessing increased demand but Wingtech and Hwachin, its manufacturing partners, weren’t able to scale up production rapidly. Samsung may need to work with them to sort out the production bottlenecks in order to realize its ODM vision.