According to reports from South Korea, Huawei has successfully established independent capabilities in mobile processors and operating systems, following in the footsteps of Apple. This development is seen as a strategy to enhance product price competitiveness by reducing reliance on external companies for OS licensing fees and lowering production costs through proprietary chips.
The report highlights that Huawei's recently launched Mate 70 series smartphones are equipped with the self-developed Kirin 9100 mobile processor, utilizing a 6-nanometer process. This processor is an upgraded version of the Kirin 9000s, which was used in the Mate 60 series and is based on a 7-nanometer process. Notably, the Mate 70 runs on the independent operating system 'Harmony Next,' which does not utilize Google’s Android open-source code. The launch price for the Mate 70 is set at 5,499 yuan, a 21.4% decrease from the previous generation's 6,999 yuan.
Market analysts indicate that as smartphone functionality innovations reach their limits, price-performance ratio is becoming a crucial purchasing factor. In this context, technological independence is emerging as a new pathway for companies to enhance pricing strategies. Apple, which has consistently utilized its own designed processors and operating systems (iOS), has managed to freeze product price increases for three consecutive years, maintaining the same pricing for the iPhone series from 2022 to 2024.
In contrast, while Samsung has also frozen the base price of the Galaxy S24 to counter Apple’s pricing strategy, the Galaxy S24 Ultra has seen an 8.3% price increase due to rising component costs, including mobile processors.
Samsung faces ongoing pressure from rising Qualcomm mobile processor prices each year when launching new products. Despite having its Exynos series of processors, yield issues have limited Samsung's negotiating power with major suppliers like Qualcomm. The Galaxy S25, projected for release in 2025, is expected to continue using Qualcomm processors due to these yield challenges. Consequently, the mobile experience (MX) division of Samsung Electronics reported a revenue of 30.52 trillion won in Q3 2024, a mere 1.7% growth year-over-year, while operating profit has declined by 14.5%.
In comparison, Apple has not disclosed its smartphone business operating profit, but research firm Counterpoint Research indicates that Apple accounted for 85% of global smartphone market operating profit in Q2 2023, while Samsung only held 12%. This suggests that Apple’s operating profit for its smartphone business in Q2 2023 was approximately $11.05 billion (around 15.49 trillion won), nearly seven times that of Samsung.
Moreover, having a self-developed operating system not only reduces external licensing fees but also allows for the creation of new profit models within its ecosystem. Google and Apple charge around 30% in commissions on app payments within their operating systems, significantly boosting operating profit. Although Samsung previously developed its Tizen OS, it abandoned the project due to poor performance and now primarily uses Google’s Android OS.
Industry insiders suggest that Samsung currently faces challenges in offering products with its own OS to users accustomed to Google’s Android ecosystem. While Samsung is exploring ways to improve the yield of its Exynos processors and reduce dependency on Qualcomm, the operating system remains a critical factor. Samsung is encountering difficulties in achieving independence in both mobile processors and operating systems, which is likely to continue impacting profitability as time progresses.