Samsung Electronics has had a tough going lately. They’ve been losing smartphone market share to Apple at the high end and to local heroes at the lower end. It’s not all doom and gloom though, as their chip business, which had been losing lots of money, has been doing well recently. A lot of that had to do with memory and manufacturing Apple’s A8 SoCs in my backyard, Austin, TX. I believe more challenges are ahead, though, as Samsung has created a new set of cost issues with the Galaxy S6 and S6 edge, which could impact their smartphone competitiveness in the future. A little background first…
There has been a lot written lately about Samsung’s use of their own Exynos applications processor (AP) and modem in their latest crop of smartphones, the Samsung Galaxy S6 and the S6 edge. The news factor here was big, particularly because Samsung Electronics previously used Qualcomm for APs and modems in their hero phones. While Samsung routinely moves suppliers in and out of products, and in fact, had already used their own APs in other phones, that this was happening in North America at AT&T was viewed as a big deal. Qualcomm’s CEO directed attention to it as well, when he publicly announced they had lost a very large customer. I think many thought there would be a big cost savings moving away from Qualcomm for the AP and modem.
Last week, Arik Hesseldahl at Recode penned an article on an IHS teardown study on the Samsung Galaxy S6 edge. It said that Samsung added $34 of cost to the Galaxy S5. IHS was quoted saying that, “The bottom line is that this phone costs less than an iPhone to buy, but it costs Samsung more to build.” That was a surprise to just about everyone. The S6 edge is a big improvement, but to cost more than the iPhone 6 is astounding. Within this IHS revelation is that not only is the phone more expensive to make, but so are the home-grown Exynos SoC and modem. One would have thought that would have been a savings, right?
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