One in 10 Galaxy S4 units to feature Exynos 5 Octa chip, new report says

Samsung and Apple are apparently engaged in an unseen battle for controlling supply chains for future products, with the South Korean company looking for more component deals outside of its in-house capabilities, a new Reuters story says.

Exynos 5 Octa vs Qualcomm Snapdragon 600

According to analysts, only about 10% of Galaxy S4 units will pack Samsung’s newest eight-core processor – or one in 10 units – with everything else relying on chips from Qualcomm. Comparatively, about 30% of Galaxy S3 units shipped with an Exynos processor.

The more mobile devices Samsung ships each quarter, the more components it will need to keep manufacturing a high-number of Galaxy-branded smartphone and tablets destined for different markets.

One of these models is obviously the Galaxy S4, its latest flagship product that’s selling like hot cakes in multiple countries – to date, the handset has become the fastest selling smartphone for the company.

While the Galaxy S4 offers generally the same specs and features no matter where you buy it from, it does come in two distinct flavors when it comes to its system on a chip (SoC). We’re looking at a model powered by the quad-core Qualcomm Snapdragon 600 processor, while the other has inside the Samsung-made eight-core Exynos 5 Octa processor (it actually packs two quad-core CPUs).

The difference in performance between the two is negligible some would say, Samsung included, while others will disagree. Existing AnTuTu tests reveal that the Octa model outperforms the Snapdragon one, although regular users may not notice the difference in performance in day-to-day activities.

For Samsung, shipping enough units to carrier and retail partners seems to be a primary objective. And to do so with the Galaxy S4 – which faced some launch issues caused by insufficient stock – Samsung decided to go with Qualcomm:

“We'll continue to resort to multi vendors to ensure smooth supply,” Kim Hyunjoon, vice president of Samsung's mobile business, told analysts on a recent earnings call.

The battle for supplies

Samsung still makes 80% of the components needed for its mobile business in-house, so it’s not as dependent on third-party suppliers as its competitors, Apple included. In fact, Apple was on of the biggest Samsung customers, shopping for various mobile components for its iOS-based devices in the previous years. But that may change in the future as the iPhone maker looks to distance itself from its main competitor in the mobile business, a rival who’s also fighting in courts over patent-related issues.

Samsung and Apple captured 100% of profits in the first quarter of the year, and more than 100% of profits in the previous year.

When it comes to other components, it looks like Samsung and Apple may be fishing for the same parts from the same providers. Some of the companies that already supply parts to both companies include Qualcomm (LTE chips), Toshiba (NAND memory chips), Sony (image sensors), and Corning (Gorilla Glass).

Other companies like Sharp (displays) and STMicroelectronics and Bosch (both “mass producers of pressure sensors used in navigation features”) could also provide components to both companies. Currently Sharp ships displays to Apple and is reportedly looking to “boost sales to the Korean firm,” while STMicroelectronics and Bosch deliver parts for Galaxy models.

Some analysts seem to believe that outsourcing more components would mean that Samsung would lose some of that hardware differentiation that helped the company reach its current position in the mobile ecosystem:

“Given that Qualcomm chips are also found in rival products, and the much-heralded launch of smartphones with flexible display appears to be delayed, I'm worried Samsung is losing its hardware differentiator,” said BNP Paribas analyst Peter Yu.

But let’s not forget that Samsung has one particular department that’s working at full steam to sell Galaxy products. That’s its marketing department that has access to virtually unlimited resources. Samsung outspent all its competitors in the past year promoting its mobile devices. In fact it spent “more on marketing than on research and development” in 2012. The company could have a similar approach this year as it fights for more market share and profits in the mobile business.

Will Samsung and/or Apple encounter supply issues as they continue to clash for mobile domination? We'll just have to wait and see how it plays out.