Smartphone ODM Share: Samsung 30% · LG 70%

Increasing ODM Production of Mid-Range Phones to Reduce Costs

[Asia Economy Reporter Han Jinju] Samsung Electronics and LG Electronics have significantly increased the proportion of smartphone ODM (Original Design Manufacturer) production this year to reduce costs.

According to the ODM Tracker report by market research firm Counterpoint Research on the 16th, Samsung Electronics' smartphone ODM production ratio is expected to rise from 7% last year to over 30% this year. LG Electronics increased it to 70% this year. Xiaomi and Realme have ODM proportions reaching 80%.

ODM production is a manufacturing method where the manufacturer is responsible for product design and component procurement, achieving cost reduction through economies of scale in the process. Brand companies benefit by being able to focus on product planning and marketing. Until now, Samsung and LG Electronics prioritized in-house production for independent product development, but recently they have been increasing ODM production in mid- to low-end smartphones.

Samsung Electronics is expected to maintain the ODM proportion of mid- to low-end smartphones at a certain level going forward. It is difficult to significantly expand the ODM proportion due to challenges in quality control. The increase to 30% ODM production this year aligns with forecasts that Samsung will produce up to 100 million units through ODM.

LG Electronics is also using the strategy of increasing ODM production as a measure to overcome deficits. LG Electronics has reorganized to strengthen its ODM organization, interpreted as a shift in business direction focusing on ODM. Unlike Chinese manufacturers targeting India, LG Electronics' main target is the North American market, so the impact of cost reduction through ODM on brand image cannot be overlooked.

Kang Minsu, a researcher at Counterpoint Research, said, "While the ODM method allows securing market competitiveness with relatively low investment costs, it is difficult to differentiate from existing ODM users, and the loss of competitiveness in low-priced products may weaken future competitiveness," but added, "As competition in the smartphone market intensifies and product differentiation decreases, the strategy of utilizing ODM for cost reduction and rapid market entry is essential for securing competitiveness in the smartphone market."

This content was produced with the assistance of AI translation services.