VP left behind in US to resolve shortage issue
Shows seriousness of global chip shortage, Samsung's weakened buying power
Samsung Mobile boss TM Roh had made two trips to the US this year to meet major US component makers to secure more supplies of application processors needed in smartphone production, TheElec has learned.
Roh had asked major partners to supply Samsung with more application processors but was denied, sources said.
He had made a trip in March and another in July. In July, Roh, the president and head of Samsung’s mobile business, visited a global application processor maker.
Roh asked for more chip supply but was refused outright, the sources said.
The global application processor maker had told the Samsung president that they wished to increase overall supply too, but couldn’t increase the supply to the South Korean tech giant alone.
Roh was accompanied by a vice president who oversees component purchases during his July trip. The president left the vice president behind in the US at the time, ordering them to only return to South Korea once he resolves the issue.
The Samsung president also “harshly” admonished a senior vice president who is the head of component purchases at Samsung Mobile, the sources said.
The vice president who remained in the US returned to South Korea after staying there for about three months.
A Samsung spokesperson said their trips were not completely without results and that they resulted in the company being able to secure some volume.
Roh’s failure to secure more chip supply shows the seriousness of the current global chip shortage.
Smartphone production has been negatively affected by the shortage in the third quarter. The situation is expected to continue to the fourth quarter.
Roh’s failure also shows Samsung Mobile’s weakened buying power in the global smartphone supply chain, the sources said.
Important customers usually get the first batch of supply, and Samsung, the world’s smartphone manufacturer, being refused was highly unusual, they said.
Samsung’s increased reliance on original design manufacturers in China was also one cause of this weakened position, as these companies procure components on their own, decreasing the South Korean company’s total component purchases, they added.
These manufacturers currently account for up to 20% of Samsung’s phone production. China’s Wingtech manufactured Galaxy A6S in 2018 and Galaxy A01 in 2019. It is planning to manufacture Galaxy M02 this year. Another such manufacturer, Huaqin, will be manufacturing Galaxy A02. Samsung begin this outsourcing when Roh became president.
The shortage of chips has caused Samsung to reduce its planned smartphone production.
Apple is dominating the flagship space, while the South Korean tech giant’s Galaxy S series is yet again expected to sell under 30 million units this year.
Samsung is also not planning to launch the Galaxy Note series this year. Its foldable models, Galaxy Z Fold 3 and Galaxy Z Flip 3, are being received well by the market but are only expected to move 7 million units together.
Samsung is expected to ship 260 million units to 270 million units of smartphones this year, down from its earlier estimate of 290 million units to 300 million units, due to the chip shortage and production shutdowns in Vietnam from the pandemic.