The average sales price of Samsung Electronics’ mobile phones is going down at a rapid pace as the global mid-end smartphone market accelerates its growth. Experts are pointing out that the mobile phone manufacturing facilities in Korea are becoming hollow, with Samsung Electronics increasing its overseas production ratio for cost reduction.
According to market research firm Strategy Analytics, the ASP of Samsung phones decreased from US$321 to US$272 between the second and third quarters of this year. The decline in spite of the company’s high-price and high-profit strategy is because the global smartphone market is shifting its focus from high-end products to mass market ones. Other major manufacturers such as Apple, HTC, and Motorola are facing the same trend, too. The situation is likely to continue for a while, as Samsung Electronics is releasing an increasing number of mid-end handsets in overseas markets.
At present, the cheaper smartphones priced at US$250 or less account for 30% of the entire market, and that percentage is rising rapidly. As recently as the first quarter of this year, Samsung’s ASP was second only to that of Apple. However, it is supplying handsets at lower prices than HTC and Sony as well as Apple these days. Specifically, it is estimated that the ASP of Samsung is less than half of Apple’s.
In the meantime, Samsung Electronics is moving more and more of its smartphone manufacturing facilities to Vietnam, China, and some other countries with lower labor costs. Although the number of the phones supplied by Samsung is going up worldwide, its domestic production ratio is falling nonetheless.
Its Gumi plant in North Gyeongsang Province produces approximately 38 million units of phones a year, which is less than 10% of Samsung’s total handset production volume. The company is expected to sell 300 million units of phones across the world this year, but the record is unlikely to result in investment expansion and job creation in Korea.
In contrast, its investment in the production facilities located in Vietnam is skyrocketing year after year. Samsung’s second plant in Vietnam, which is built at an investment of 2.22 trillion won (US$2.11 billion), will be put into operation from February next year to take the place of its factory in China. It is planning on an additional investment of 1.11 trillion won (US$1.06 billion) in another plant in the Yen Phong Industrial Complex.
At the same time, Samsung Electronics is trying to cut production costs in Korea by asking its partner firms to lower their component supply costs. Those in the know have pointed out that Samsung has made such requests on a rolling basis while asking for bigger markdowns for some of the firms.