Getting More From Less
By Eric Lin, Fri Aug 20 23:45:00 GMT 2004

LG has shifted its supply strategy for cameraphone modules, placing huge orders with fewer companies.

LG has shifted the way it buys camera modules for mobile phones. The company used to buy the components from up to six different suppliers, however it has now reduced that number to three. As exclusive suppliers to LG, the three companies are guaranteed a minimum order of 10 million units each in exchange for lowered unit costs. LG hopes to reduce their unit cost from about $15 to below $10 for the modules which are in high demand.

By reducing cost, LG hopes to squash Samsung price-wise and defeat its Korean rival in the marketplace. It is highly unlikely that reducing the cost of a camera module will be the factor that causes more users to buy LG phones over Samsung units, but this bold move should still have more positive consequences than mere reduction in unit cost.

One of the biggest problems plaguing the cameraphone market today is a component shortage of camera modules. Nokia recently admitted they were behind on modules for their 6230, causing shortages of the popular handset. Months ago Motorola was plagued by launch delays of highly anticipated models like the V600 thanks to the same problem. By placing huge orders with its camera module suppliers, LG has at least guaranteed that it will have one advantage over competitors: a steady supply of highly coveted components. Even if price doesn't put LG in a superior position over Samsung, sheer availability of cameraphones could if Samsung experiences lapses similar to other large manufacturers in the coming year.