Samsung eyes China for chip business
By Kim Yoo-chul
Samsung Electronics is moving to expand its chip business in China to minimize its reliance on Apple, according to Samsung executives.
The global technology giant said that it is seeking to open new business talks with Chinese budget smartphone makers such as ZTE and Huawei in order to offset the rising risks of losing some business from Apple in key areas including mobile processors, that power and control computing systems.
According to Samsung officials at last week’s International Consumer Electronics Show (CES) in Las Vegas, top executives, including Samsung Electronics CEO Kwon Oh-hyun, held meetings with Chinese companies to sell more mobile processors.
''We have introduced the Exynos 5 Octa to appeal to Chinese clients and diversify our client base in China with better pricing and output commitment,’’ said a senior-level Samsung executive during the show.
He added Samsung heir-apparent and Vice Chairman Lee Jay-yong was briefed about meetings with some Chinese smartphone makers by Kwon.
Samsung said the latest Exynos chips have an eight-core processor, which is more powerful than the current quad-core processors and enhance battery life.
Samsung plans to use the Octa core processor in the upcoming 6.3-inch Galaxy Note III, which will debut later this year, according to the officials.
The strategy shift is receiving favorable responses from potential future clients as Samsung is the only firm that can guarantee better pricing, output commitment and product quality.
''Yes, we were approached by Samsung. If the firm offers favorable conditions, there’s no reason to deny the new business,’’ said a Huawei official.
Huawei introduced a 6.1-inch phablet during the CES. A bigger screen size means there is a need for improved battery life and enhanced operating power, said the company official.
ZTE has also publicized its interests to do business with Samsung. ''Smartphones are our bread and butter. The market is exploding. We need better chips with better pricing,’’ said a ZTE official during a separate meeting.
Leading market research firm IHS iSuppli said ZTE increased its chip purchases by 26 percent last year from the previous one.
Apple bought 15 percent more during the same period while Taiwanese smartphone maker HTC increased its chip purchases by 23 percent, followed by China-based budget TV maker TCL with 22 percent during the same period, iSuppli showed.
''More smartphone releases by Chinese makers are giving a new business chance for us to offset risks stemming from Apple. We’re not worrying too much,’’ said the Samsung executive.
Apple pays Samsung about $8.8 billion for mobile chip production, or about 80 percent of its logic chip division’s revenue, according to estimates from Goldman Sachs, which expects the iPhone maker to reduce its orders by 80 percent by 2017.
Samsung is building a chipmaking factory in the western Chinese city of Xi’an. Although it said the factory will mostly produce flash-type chips, Samsung officials said it’s not too difficult to change lines to produce mobile application processors if needed.