Samsung using component supplies for competitive edge, says HTC

Samsung has been receiving a lot of flak for blurring the lines between its position as both a smartphone component supplier as well as a handset competitor. Now HTC has also joined the list of companies that are accusing Samsung of using its position as a component supplier to increase its competitive edge.

In a report that was done by Focus Taiwan, the President of HTC North Asia, Jack Tong, went on record to give examples of how Samsung is exploiting its (HTC’s) needs as a component customer so as to throw a wrench in HTC’s smartphone operations and get in the way of its sales. According to him, the company “found that key component supply can be used as a competitive weapon."

A clear example of that was seen when HTC developed its Desire phone while using a Samsung AMOLED screen back in 2010. While talking about this instance, the HTC President said that as soon as the smartphone sales began to pick up, Samsung was seen “strategically declining” to fill orders for the critical component, which in turn forced HTC to completely redesign its product.

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As noted in a report by Apple Insider, HTC Desire won the “Highly Commended” award, at the 2011 Mobile World Congress, where judges noted that the phone was setting a new standard for Android phones across much of the world.

Samsung comes under flak for using its component supply as competitive weapon

In order to combat Samsung’s competitive tactics, HTC has since been working with Taiwan’s Ministry of Economic Affairs to get its own local supply chain. This will then ensure key component availability and reduce the cost of production for domestic manufacturers. This in turn will reduce the company’s exposure and reliance on outside sources for components.  

Other companies that the Ministry has been reported working with include Acer and Asustek. The Ministry is also looking at recruiting other foreign companies to help develop display and the production of other components needed for smartphones in Taiwan.

Apple has also taken similar steps to move its production and component orders away from Samsung. However, Apple still outsources much of its display, memory, processor fabrication and other component requirements to Samsung. The reason behind this is simple; Samsung has pumped in billions of dollars developing its component production facilities.

Unlike HTC though, Apple has always had enough core capital to sign long term contracts with competent suppliers, which limit the amount of damage that Samsung can do. However, the US patent trial of Samsung in 2010 clearly showed how Samsung had used its inside knowledge to clone much of the technology that was seen in the iPhone 3GS and in turn produce its own line of Galaxy phones. 

Apart from the component aspect of Samsung’s operations, the company also came under fire for sanctioning people to post fake reviews of HTC phones through social networks in Taiwan in order to discredit its line-up. This in turn saw the Taiwan’s Fair Trade Commission launching an inquiry into Samsung’s business practices.

Another one of Samsung’s reported campaigns revolved around an internal “Kill Taiwan” campaign, which saw the company targeting the Taiwanese micro chip and display panel manufacturers. This has later been seen blowing up in Samsung’s face, as the move has since strengthened links that Apple and Taiwan share. The move saw Apple pumping in billions into Taiwanese production, including Taiwan Semiconductor Manufacturing Co, so as to shift its ARM processor fabrications orders away from Samsung.