Date: 13/12/2012

Low cost tablet makers to cut cost by smart sourcing and supply chain tricks

The mobile device market both the smart phones and tablets have become highly cost competitive, where $100-150 tablets have flooded the gadget shops. While selling the mobile devices at low price, what really matters finally for such companies is profit. The way to reduce cost is by smartly selecting electronic components, semiconductor ICs and other parts, which are technically very good but not in the top, so that price negotiation is possible.

TrendForce's research says the replacement of key component parts, at the moment, serves as the only viable option for PC-branded manufacturers who are seeking to reclaim their market positions through low-pricing strategies. Up to $25 USD can be saved by changing display and touch module components, as per TrendForce. Given that the display panel and touch module both account for approximately 35~40% of a tablet's total material cost, they are, naturally, major targets when it comes to controlling manufacturing costs, adds TrendForce.

TrendForce says selection of commodity DRAM, eMMC NAND flash memory, and processor chips from China-based manufacturer is cost saving trick.

Another way is to find which supplier has excess stock and has the manufacturing equipment to make a component which is not preferred by high-end gadget maker. So that component can go into low cost devices. Example is, chips made using 90nm fabs are not preferred by highend tablet makers, but the 90nm semiconductor fab can not kept idle, so they make chips for low end devices.
NPD Research says players within the supply chain (display manufacturers, OEMs, and brands) have modified their business strategies and allocation plans to leverage their strengths and maintain market share.

“With the changes taking place in the mobile PC segment, existing supply chain relationships could be disrupted due to competitive conflicts,” noted Jeff Lin, Value Chain Analyst at NPD DisplaySearch. “For example, Samsung Display plans to improve its mobile PC customer portfolio by reducing its share in Apple and increasing support to captive brands and other external customers, like Amazon and Barnes & Noble.”

With razor-thin profit margin, the tablet and smart phone market is a dangerous area for the people who don't know commodity electronics market. It less of a electronics design expertise and more of a manufacturing smartness.