Samsung's Ups And Downs (8): Samsung's Handset Strategy
Samsung Electronics is trying to shift the mobile phone market to foldable phones, hoping to raise the price of one and increase production of its own OLED panels. Samsung is expected to sell more than six million foldable phones by the third quarter of 2022, and will sell the panels to other phone makers. This is a common strategy of Samsung.
However, the share of low-end phones in Samsung's product portfolio is not easy. According to UBS estimates, in 2022, 60% of Samsung's mobile phone sales will be devices in the sub-$200 segment, and almost 30% will be high-end models priced above $300, and 74.5 million units will be high-end. . The rest will be mid-range devices in the $200-$300 range.
The mobile phone division's overall profit contribution to the Samsung Group is expected to fall from 26 percent in 2021 to 22 percent in 2022, while the phone division's overall profit is down about 20 percent. In addition, the profit of the consumer electronics division will decrease from KRW 364.4 billion to KRW 200 billion, which is a decrease of more than 40%.
That's a big reminder for Samsung, which once relied on high-quality components and a niche market position to boost its base unit revenue. But in an economic downturn, overinvestment that accounts for most of past success can become an unavoidable burden.
Samsung is expected to try to maintain the low KRW 2.8 trillion profit in the memory segment. China's YMTC has reached 192 layers for 3D NAND and is expected to have a market share of over 5% by 2022, posing a threat to the South Korean memory giant. Samsung relies on strategic partners like UMC to focus on advanced processes to make its memory competitive.
Achieving market share in the high-end phone segment is not easy. Samsung's foldable devices and OLED panels will be on display. Low and medium-level production is being exported, and Samsung may be preparing to produce all of them in overseas factories. According to DIGITIMES Research, of Samsung's 270 million phone shipments, about 50 million units were diverted to the Chinese industry, benefiting factories supporting Taiwan factories. It's not just low-end phones; Other sectors, including industrial control software and networking equipment, may look to outsource or outsource. The relationship between Samsung and Taiwanese manufacturers has also entered a new era. Is Taiwan ready?
In front of the display, OLED can beat miniLED, and Apple wants to install LG Display (LGD) and BOE. Samsung phones once accounted for two-thirds of the company's profits. Semiconductor growth helped maintain Samsung's overall profitability despite a weak mobile division.
However, the current semiconductor boom appears to be over, with memory falling first and Micron and YMTC looking for more market share. Samsung's factory in Xi'an, China, which accounts for 40% of the company's flash memory capacity, has now "committed" to the proposed Chip 4. South Korea, which exports 60% of its semiconductors to China, is more dependent on the Chinese market than Taiwan, leaving Samsung burdened by geopolitical tensions.
Samsung is looking at a foundry, but faces serious hurdles caused by TSMC. Greater strength gives TSMC a structural advantage going forward. It was easy for Samsung to overcome that hurdle. Samsung is likely to fail in its efforts to widen that barrier.
(Editor's note: This is part of a 10-part series by Digitimes Asia President Kohli Hwang on Samsung's views.)
Estimated shipments of Samsung phones by price range (per unit)