Samsung Chooses Contract Manufacturing for Producing Cellulars

Samsung will pass on the job of manufacturing mobile phones almost completely to contractors. 90 percent of all handsets coming from Samsung will be produced by other companies, leaving only slight touches to be added to the final product.

Samsung Electronics' suppliers for the handset cases will provide 500,000 to 700,000 units, almost all of what this producer has to offer over a month. This includes attaching the window lens and the display, leaving Samsung to insert the software and assign a device serial number.

The new strategy is supposed to help Samsung catch up with Nokia, the leading handset producer by increasing its productivity line. Resorting to contractors should speed up the process, as all other top 5 handset manufacturer companies use the EMS system. The advantage of this solution is that it saves costs when it comes to labor and inventory. There are also some risks, as any errors coming from the contractors refrain on Samsung.

Intops is one of the suppliers that will provide 300,000 to 500,000 units of the ready-to-sell mobile phones to Samsung Electronics on a monthly basis. "Of course, it would be limited to several models only. However, we will provide handsets, which has been completed 85~90% of the manufacturing process, to Samsung. The average monthly volume is expected to be 300,000 units. But, it is likely to increase to 1 million units", said Managing Director Young-tae Jeong of Intops.

Up to this point, Samsung Electronics relied on suppliers to provide sub-module only, in half of the completed products. Moreover, it chose its domestic suppliers as partners for its outsourcing in an attempt to keep a high security level, as they had a long work history together. The company now expects an important growth of its revenues, big enough to boost its profits.