Did you know that Samsung makes the displays on iPhones and Sony makes the cameras used by most top-tier smartphones? Heck, the Snapdragon 8 Gen-1 series of processors, the most potent Android processors out right now were being made by Samsung. Smartphone manufacturers or OEMs do not manufacture every component found in their phones in-house but instead, do design work and outsource production of some components to different suppliers. And for some they just buy them off the shelf. To understand why, we need a little refresher on how the tech world works.
We’ve been partnering with Sony for over a decade to create the world’s leading camera sensors for iPhone. Thanks to Ken and everyone on the team for showing me around the cutting-edge facility in Kumamoto today.Tim Cook – Apple CEO
Early adopters turn into experts
Back in the day when electronics started, different companies decided to specialize in different fields. As they put money into research in the tech they developed, they also collected patents for the tech they developed. The patents part is its own topic but picture this. Companies like these spent decades investing time and money into improving the tech they produce and more crucially fine tuning the process they use to make the tech.
These early adopters got so deep into the tech they were making and are so far ahead to the point that it is monumentally more expensive for anyone to start now, catch up and still produce the same products at a competitive price. Also, patents protect these early adopters from the risk that any other person can replicate the product or process.
Cost
We as consumers want the best value for money. And in the same breath, the product manufacturer (OEM) wants to make as much profit as they can. But for them to stand out they have to make a compelling and attractive product.
An OEM will not be able to make every component in-house at a high level of quality for their smartphones. It’s just way too many machines, time, and R&D work which is all quite expensive. Buying off-the-shelf components for as many parts as possible is the way. After all, they are cheaper, of higher quality, and also reduce the turnaround time of producing a finished product. Time is money.
Saving time. Outsourcing manufacturing
In the industry work is done at some very large scale. So large that some companies make a living off selling a production process. Not even a finished product but a process. The main reason being that an efficient enough process saves on time and money.
OEMs will invest a lot of resources in the design of their smartphone hardware and software such that the final product is one that is unique and desirable to their target market. This comes with it’s own complexities. The several different components going into making a phone will constitute different kinds of boards and chips which again will all need a heap of manufacturing equipment and processes. A big cost for plenty of manufacturers.
But there already exists a heap of companies specializing in manufacturing chips and boards who have already done the investment in the tools and the processes to produce quality products at a low cost with a good turnaround time. These are the companies that OEMs will work with whenever they are designing a new smartphone. Let’s look at the major components of smartphones and who actually makes them.
CPU/SOC – The brains of every smartphone
Mediatek, Qualcomm and Apple are the top 3 names in smartphone processors with a market share of 35%, 31% and 16% respectively as of Q3 2022. Mediatek processors are used in a number of Android smartphones. They focus on powering low, mid and upper-mid tier smartphones which are the majority especially in emerging markets like Asia and Africa.
Qualcomm is well known for making the most cutting edge processors for the Android market and is the undisputed Android Flagship processor of choice. Whatever top-tier Android smartphone you have is most likely powered by a Qualcomm CPU.
Mediatek and Qualcomm share the same building blocks within their processors. The processing cores, the ones that assign processors names like Quad Core or Octa Core, are all designs from a company called ARM. This company does not manufacture anything. They just design the processing cores of smartphone CPUs and give them to Mediatek, Qualcomm, Samsung (Exynos), Google (Tensor) and Huawei (Kirin).
What these companies then do is add their own stuff to these cores like AI processing chips, Image processing cores for the cameras, display drivers and whatever number of sensors they want forming the final form SOC (System On Chip)
Apple is the only smartphone manufacturer that designs all aspects of their SOC in-house. They do not use ARM designs for their CPU cores but use their own. Same goes for their smartphone GPUs.
However, with the exception of Samsung’s Exynos, no one else on this list of companies actually manufactures their own processors. Rather they send their designs to TSMC (Taiwanese Semiconductor Manufacturing Company) who then take these designs and produces the physical chips that go into smartphones. TSMC has the most advanced equipment, production process and the largest capacity allowing them to mass produce these chips with the highest yield rate (ratio of working chips to defective ones per 100 made).
Display – Your primary interaction with your smartphone
There are a few major players in smartphone display manufacturing. Samsung Display, BOE and LG Display. These 3 companies account for 73% of the global smartphone display market with Samsung Display’s slice at 49%, BOE at 16% and LG at 8%.
Samsung Display produces OLED panels for Samsung, Apple, Xiaomi, OnePlus, Oppo, ZTE, Hisense just to name a few. BOE produces OLED panels for Huawei, Apple, Oppo and Vivo and LG Display produces panels for Apple, Nokia and Samsung.
Things got a bit confusing there now didn’t they? These 3 display makers are independent businesses whose sole purpose is to manufacture displays. OEMs like Apple who have a substantial demand for smartphone displays can overwhelm a single display maker so they all share the load. Hense why we see Apple on everyone’s supply list.
The display makers themselves are also segmented. Samsung Display mainly focuses on high-end displays for flagship smartphones. LG mainly focuses on displays for mid to upper-midrange smartphones and BOE mainly focuses on lower-mid to upper-mid tier smartphones.
Device manufacturers will often send specifications to these companies particularly for their flagship smartphones. When they receive the panels they then caliberate them to suit the hardware they are putting them on as well as meeting their performance parameters. So even though one OEM can use multiple suppliers, the performance of the displays will be the same.
Cameras
The 3 biggest smartphone camera sensor manufacturers are commanding 83% of the total market share. These include Sony with 44%, Samsung with 30% and OMNIVISION with 9%.
Sony cameras are used in Sony, Apple, Samsung, Huawei, Xiaomi, Pocophone, RealMe, Oppo, Vivo and ZTE smartphones amongst others. Samsung camera are being used in Samsung, Xiaomi, Vivo, ZTE, Google and Tecno smartphones and OMNIVISION can be found in Xiaomi, Realme, Motorola, Poco, Realme, Oppo, Huawei, OnePlus, Honor, Sharp amongst others.
Just like on displays, a single OEM can use cameras from multiple manufacturers and with how smartphones are now coming with multiple cameras of different focal lengths slapped on the back, each smartphone might have different sensors from different manufacturers based on the specifications they drafted for that particular phone.
RAM & Storage
Samsung, SK Hynix and Micron are the 3 biggest smartphone DRAM and NAND Flash Memory manufacturers with a combined 95.4% and 86% market share respectively. Samsung is ontop with a smartphone RAM market share of 43.5% and a smartphone storage market share of 49%.
SK Hynix comes second in both categories with a 27.4% market share in smartphone RAM and 23% market share in smartphone storage. Micron comes in 3rd in both categories with a smartphone RAM market share of 24.5% and a smartphone storage market share of 14%.
So every smartphone maker buys their RAM and storage chips mostly from any of these 3 manufacturers. And there is close to a 50% chance that your phone is using Samsung RAM or storage chips regardless of what brand it is. iOS or Android.
Batteries
Batteries are the final major smartphone component we will cover and 82% of this market is controlled by Amperex Technology, LG and Samsung. Market share for these 3 looks like this. Amperex Technology sits at 42%, LG sits at 22% and Samsung rounds up the set at 18%.
Yes. Samsung is everywhere
Samsung is one of the few electronics companies with a business in every major component that comes in smartphones. They decided to double down on the consumables but also play a hand in the smartphone game.
However the key takeaways are these. Smartphone makers do not manufacture in-house all the components that go into a smartphone. What they do is they design a smartphone and work with suppliers to streamline the production process so that production time and costs are cut.
High-end flagships will use more custom components than lower tier smartphones. They may either use a higher proportion of components manufactured in-house or will send out a lot more custom designs for their components to 3rd party manufacturers. Thats why high-end smartphones are expensive.
And lastly, these processes are true in manufacturing accross the board for consumer products that you and me buy. Computers, cars, laptops, TVs, they are all made in a similar way. You have a company that fabricates or produces individual/discrete components. Then you have the OEMs which are the brands we interface with, your Samsung, Apple, Mercedes, Toyota, which take these individual/discrete components and combine them to form an appealing product for you and me to buy.-techzim