Does Samsung care that it doesn’t have enough devices to sell anymore?

Opinion
By 

Last updated: September 20th, 2021 at 18:16 UTC+02:00

The past two years have been unusual, to say the least. The world literally shut down early last year as the COVID-19 pandemic got out of control. Stepping out of the house became the difference between life and death. Many businesses couldn’t recover from the economic fallout and countless people lost their jobs.

Even some of the world’s top companies weren’t immune to the devastating effects of the pandemic. In particular, it upended supply chains across the globe, leading to a shortage of critical components that prevented them from getting their products out to the market.

As the world reopens to a new normal, the supply chains have yet to fully recover, and there’s no better example of this than the global chip shortage. There has been incredible demand for chips over the past year and there’s just not enough capacity to fulfil it.

That’s one of the main reasons why you still can’t go into a store and walk out with a PlayStation 5, why scalpers are still selling GPUs for the price of a kidney, and why some of Samsung’s much-loved devices are nowhere to be found.

Not only does the Galaxy A series include some of the best Samsung phones, but these models are also among some of its best-selling devices. However, the semiconductor shortage has disrupted the production of Samsung’s 2021 Galaxy A models.

For example, even though it was launched alongside the Galaxy A52 earlier this year, the Galaxy A72 remains unavailable in the US. Some Galaxy A models also remain in short supply in other markets across the globe.

There’s also the fact that Samsung chose not to launch a new Galaxy Note flagship in 2021. The company said that the chip shortage was a big reason why it decided to let down some of its most loyal fans this year.

While it hasn’t said anything about the device, chips being in short supply might be a reason why the Galaxy S21 FE has been delayed to the point that when/if it’s launched, it’s going to be dead on arrival.

That’s ironic because Samsung’s reason for launching the Galaxy S20 FE last year was to provide customers battered by the pandemic a near-flagship experience at a lower price. The great response that it received for the device encouraged the company to promise that it would release a Fan Edition version of its Galaxy S flagships every year.

It’s rare for Samsung’s carrier partners to make their frustrations with the company public. So it was surprising to hear CFO Peter Osvaldik of T-Mobile, one of the largest carriers in the US, say that Samsung has “fallen behind” other OEMs on the global supply chain issue.

T-Mobile’s frustrations stem from the fact that a large percentage of its customers tend to prefer Samsung smartphones. So the carrier isn’t happy that it doesn’t have a new Note flagship to sell to them. Osvaldik even mentioned that Samsung’s Galaxy S series devices are also in “very short supply.”

It begs the question why a company that makes most of the chipsets used in its devices, even flagships, doesn’t seem to have enough devices to sell. Could it be that Samsung is prioritizing the foundry business over mobile?

Is it fine with using more of its production capacity to make chips for others during a global supply shortage instead of ramping up production of its Exynos line? Or to supply new Exynos chips to competing Android manufacturers instead of using them in its phones?

Since the finer details of Samsung’s corporate strategy remain a mystery, there are no easy answers to these questions. One can understand that if the foundry business has existing contractual supply obligations then it has to utilize whatever production capacity it has to meet them. Even if that comes at a cost to its mobile shipments.

Samsung sees the foundry business as an engine for future growth. As companies struggle to find capacity at other foundries, Samsung stepping up and accepting new orders during a global supply crunch could help it win goodwill from new customers that might choose to contract its manufacturing services in the future as well.

Let’s not forget that it’s all about money in the end. All of the divisions under its umbrella contribute to the billions that Samsung Electronics makes every quarter. With margins on smartphones already being slim, if Samsung can make more money supplying chips to others when they’re willing to pay top dollar due to a global shortage, does it make a difference if it has enough devices to sell when it ends up making more money?

Samsung shipped roughly 255 million smartphones in 2020, almost 50 million fewer units compared to 2019. The 2021 shipments may come in below that. The Galaxy S21 sales have been poor and as previously discussed, the Galaxy A units remain difficult to find in key markets.

New Galaxy Note series handsets have consistently sold more than 20 million units but we aren’t getting one this year. Samsung is even believed to have cut its Galaxy S21 FE sales expectations by three million units since the delayed launch will have quite a few customers just wait it out for the Galaxy S22.

Granted, the new Galaxy Z Fold 3 and Galaxy Z Flip 3 foldables are selling quite well. They have outperformed all of Samsung’s previous foldable sales to date. However, they won’t achieve the sheer numbers that a new Galaxy Note would have.

There’s no saying when this global chip shortage will ease up. Samsung is investing heavily to expand its existing production capacity and even building a new factory. However, it’s going to be a couple of years before its planned $17 billion factory in the US starts production.

What that means for the future of its mobile business remains to be seen. Will there be improved supply in the coming year? Samsung has some important product launches coming up. The 2022 Galaxy A series is crucial for its competitiveness in the mid-range sector.

The Galaxy S22 series has to recover the market share that its predecessor lost. There are signs that Samsung may have killed the Galaxy Note series altogether. The company is going all-in on foldables and perhaps may even launch a more affordable third model next year.

Perhaps there’s going to be a wider shift in Samsung’s strategy going forward that we’re not privy to right now. Fans can only hope that if they have their heart set on a new Samsung phone, they’ll be able to buy it whenever they want.

Opinion
Load comments