Samsung, which was involved in the presidential crony scandal, has seen a turnaround. According to South Korean media on January 19, after nearly four hours of interrogation, the Seoul Central District Court rejected the independent prosecution team's request to arrest Samsung Electronics Vice Chairman Lee Jae-yong and decided not to arrest him. But the past 2016 was not smooth for Samsung Electronics, which is led by Lee Jae-yong. The global recall of the flagship mobile phone Note7 has caused negative news for the technology giant. However, surprisingly, Samsung Electronics' operating profit in the fourth quarter of 2016 increased by 50% year-on-year. Behind this, upstream component businesses such as panels and chips have not only become Samsung Electronics' moat, but also a powerful weapon for it to suppress competitors. Industry analysts pointed out that Chinese mobile phone manufacturers may face more stringent supply chain tests from Samsung in 2017. Upper moat The day when Samsung Electronics' new generation flagship phone S8 will be unveiled is getting closer. It is reported that Samsung will display the S8 in a small scale at the MWC 2017 exhibition in February this year, and officially release it on March 29. According to rumors, the S8 will be shipped in late April, and the starting price will be $849. However, when interviewed by our reporter, Samsung China said that the time has not yet been determined. S8 is responsible for washing away the shame of Samsung mobile phones. In August last year, Samsung released the highly anticipated Note7 before Apple . However, a series of spontaneous combustion and explosion incidents led Samsung to announce a global recall of 2.5 million Note7 phones. It is reported that Samsung will announce the cause of the Note7 phone fire on January 23, and the battery is still considered the biggest problem. The recall incident dealt a heavy blow to Samsung Electronics' mobile business. The third quarter financial report of 2016 showed that the mobile division's operating profit in the third quarter was only 100 billion won, a 96% drop from 2.4 trillion won in the same period last year, a record low. However, the recall's impact on Samsung Electronics' overall performance was smaller than expected. On January 6, Samsung Electronics released its preliminary performance report for the fourth quarter of 2016, showing that its operating profit for the period reached 9.2 trillion won (about 53 billion yuan), an increase of nearly 50% year-on-year. This is also the largest single-quarter operating profit achieved by Samsung Electronics since the third quarter of 2013. Upstream component businesses such as panels and chips are believed to be the reason why Samsung's profits can still grow despite the heavy losses in its mobile phone business. An industry insider told the China Times reporter that the price of mobile phone chips has been rising in the second half of 2016, and small and medium-sized OLED panels are facing tight supply and demand. In addition, the depreciation of the Korean won is also good news for Samsung. A set of data can illustrate Samsung's industry position in the upstream components field. According to data from DRAMeXchange, a research organization, Samsung Electronics' share of the global mobile DRAM memory market reached 64.5% in the third quarter of 2016. According to statistics from IHS, Samsung's chips accounted for 11.3% of the global market in the second quarter of 2016, ranking second. According to statistics from AnTuTu, the top ten Android mobile phone chips in terms of market share in the third quarter of 2016 were dominated by Qualcomm , Samsung and MediaTek. Among them, Samsung's Exynos 7420 ranked second with a market share of 15.34%. In fact, the upstream components business has become the mainstay of Samsung Electronics' profits. Samsung Electronics' operating profit fell 30% to 5.2 trillion won in the third quarter of 2016. The panel and chip businesses accounted for 84.4% of Samsung Electronics' operating profit. Use shortages to clamp downstream? Samsung's advantages in the upstream components field not only make up for the losses in the mobile phone business, but also clamp down on many downstream competitors. According to the reporter, compared with the endless emergence of mobile terminal companies, the competition pattern and output of the upstream supply chain are relatively stable. In the context of the tight supply and demand relationship between the upstream and downstream, Samsung has a monopoly in small and medium-sized OLED screens. According to IHS statistics, in the third quarter of 2016, Samsung monopolized the AMOLED panel market with 99.7 million units shipped, accounting for 101 million units. At the same time, OLED screens became the choice of many mobile phone manufacturers in 2016. In addition to Samsung's Note7, Xiaomi 5, Huawei Mate9 Pro, vivo's Xplay 5 and other mobile phones all use Samsung's OLED panels. Samsung's panel-focused SMD (SAMSUNG DISPLAY) proposed in November last year that the production capacity of small and medium-sized OLED panels in 2017 would increase by more than 35% compared to 2016. According to Korean media reports, SMD executives said that Chinese mobile phone manufacturers such as Huawei and OPPO will launch OLED mobile phones in large numbers in 2017, and the production of small and medium-sized OLED panels in 2017 will increase significantly. The executive also revealed that Samsung Electronics' orders currently account for 68% of its production capacity, and this figure is expected to drop below 50% in 2017. In October 2016, the proportion of OLED panels sold to Chinese mobile phone manufacturers exceeded 28%. However, as shortages and price increases became the main theme of the mobile phone supply chain in 2016, Samsung's voice in the mobile phone supply chain became increasingly prominent. In August 2016, OPPO Vice President Wu Qiang announced on Weibo that in order to solve the problem of insufficient supply of R9 mobile phones, OPPO introduced a new screen supplier JDI and launched a new version R9km using LCD panels. The R9 mobile phone uses Samsung's 5.5-inch AMOLED display. In August last year, before Samsung launched the Note7 mobile phone, there were market rumors that Samsung restricted the supply of OLED screens to Huawei, causing the launch of Huawei's Mate9 series mobile phones to be delayed. A study by TrendForce in September 2016 showed that thanks to the hot sales of flexible OLED mobile phones, Samsung's small and medium-sized OLED panels are in a state of imbalance in supply and demand, and the earliest delivery period has been scheduled to the second half of 2017. Guo Jian, senior analyst at CCID Consulting Semiconductor Industry Research Center, told China Times that the price increase is mainly due to the large shipment volume of LCD panels. However, the price of OLED panels, which Samsung has a monopoly on, will not fall. He told reporters that OLED screens are mainly used in high-end models, accounting for less than 1/10 of all mobile phone screens. He also believes that Samsung's restriction on the supply of OLED panels to domestic mobile phone manufacturers is not a problem of production capacity, but a need for suppression. He told reporters that Samsung must first meet its own needs, and mobile terminal companies such as Huawei do not control panels and lack the right to speak. This is just like SDP's suspension of LCD TV panels for Samsung and Hisense. OLED panel supply crisis The worse news for domestic mobile phone manufacturers is that they may not be able to get Samsung's OLED panels in 2017. Apple, which plans to use OLED screens on its iPhone 8, will be their biggest competitor. In August 2016, Korean media reported that Apple had placed an order with Korean suppliers to find 200 million OLED screens for its new mobile phones in 2017, and Samsung had already won 100 million of the orders. Among other major Japanese and Korean panel manufacturers, LGD mainly focuses on large-size OLED TV panels, while Sharp and JDI will not be able to achieve mass production of small and medium-sized OLED panels until 2018. Guo Jian believes that Chinese mobile phone manufacturers may face a shortage of supplies. According to the reporter, many domestic mobile phone manufacturers have visited Samsung to seek production capacity support for OLED panels and paid the full-year orders in advance, but it is not clear how Samsung's production capacity will be allocated in the OLED field in 2017. Domestic mobile phone manufacturers are also looking for new ways out besides Samsung. In December 2016, Huawei, OPPO, and vivo jointly invested in Shenzhen Royole Technology, which develops flexible display technology. Xiaomi has previously used OLED panels produced by Shanghai Hehui Optoelectronics. In addition, BOE , Shenzhen Tianma, and Huaxing Optoelectronics have all invested in the research and development of OLED panels or small-scale mass production to varying degrees. Among them, BOE has invested the most in the field of OLED panels. In 2012, BOE invested in a 5.5-generation AMOLED panel production line in Ordos, and put it into production in 2014. In 2016, BOE also announced the construction of two 6th-generation flexible AMOLED panel production lines in Chengdu and Mianyang, Sichuan. However, Guo Jian told reporters that for domestic panel companies, the technical threshold is a major obstacle to mass production of OLED panels. "Either they can be made in the laboratory but cannot be commercialized, or they can be produced but the yield is not high enough." In addition, he also said that the production of OLED panels often requires importing equipment from Japan and South Korea, but the limited production of equipment has delayed the progress of mass production of OLED panels. He believes that domestic panel companies have already achieved a leap from 0 to 1 in the OLED field, and the transition from 1 to N will be a problem. "Once Apple adopts OLED panels this year, the entire supply chain will undergo a major integration. OLED panels have high technical barriers and small shipments. It is estimated that domestic panel companies should be able to do it in the fourth quarter of this year." As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity. |
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