Samsung is planning to manufacture 59.86 units of smartphones using joint development manufacturers (JDM) next year, TheElec has learned.
The company shared this plan with its suppliers in its recent meeting with them where it laid out its annual plan for 2023.
Samsung currently uses four JDMs, including Wintech and Huaqin.
There are opposing views on Samsung’s extensive use of JDM. While their use saves the tech giant in costs and thereby increases its profitability, some believe it weakens its buying power over suppliers.
The company is planning to manufacture around 50 million smartphones using JDMs in 2022.
The nearly 60 million units it plans to outsource next year account for 18% of the total number of smartphones it plans to manufacture in 2023.
Samsung had told its suppliers during the meeting that the company and its suppliers needed to continue their efforts to cut costs through 2023.
JDMs take a more active role in the development of products compared to original equipment manufacturers (OEM) such as Foxconn which just makes iPhones based on Apple’s design.
Back in 2019, JDMs only accounted for around 6% of the smartphones Samsung made that year.
But this has increased to double digits since 2020 since TM Roh became head of Samsung’s mobile business, now called MX Business by the company.
The company had initially planned to manufacture 70 million units using JDMs this year __ but the pandemic lockdown measures in China have forced the company to being that number down to 50 million units.
Samsung’s mobile business back in 2013, when JK Shin was in charge of the unit, recorded an annual operating profit of 25 trillion won.
This was triple the annual operating profit recorded by Samsung’s chip business of around 7 trillion won then.
But mobile business’ operating profit dipped to 10 trillion won in 2019.
But as JDMs procure their own components through their own suppliers, Samsung’s influence on its suppliers has also waned.
Last year when the chip shortage began, Samsung asked its processor suppliers to prioritize the company in their chip supply but some refused.
This sort of refusal was unimaginable from 2013 and 2015 when Samsung’s mobile business was at its peak in terms of earnings.
Samsung’s use of JDMs has also weakened its traditional South Korean suppliers from them getting fewer orders.
Meanwhile, the tech giant is also planning to continue to diversify the areas it manufactures smartphones next year.
Vietnam is to account for 46%, or 147 million units, of Samsung’s total smartphone production next year. Its factories SEVT1 and SEVT2, at Bac Ninh and Thai Nguyen, respectively, will account for 32% and 14% each.
Its Vietnam facilities had one time accounted for 60% of its smartphone production so this is a significant drop.
Anti-pandemic measures and rising human labor costs in Vietnam are also playing a factor.
India will account for 21% or 68 million units, while Brazil will account for 23 million units or 7%. Indonesia and South Korea will account for 3% each and Turkey and Egypt will account for a combined 1%.