Samsung makes two versions of each of their phone. One version uses Qualcomm’s snapdragon processor; the other version uses Samsung’s Exynos processor. Samsung ships snapdragon processor phones exclusively to the US and sometimes to Europe. The rest of the world gets the Exynos processor.
The question is why Samsung uses different processors for different markets?
For 3 reasons, Samsung uses different processors. These are patent litigation settlement agreements between Samsung and Qualcomm, keeping the same phone model’s price same in different countries, and diversifying the processor’s supply chain.
Let’s elaborate on each of these points.
Agreements between Qualcomm and Samsung:
In 2009, Samsung and Qualcomm entered into a patent licensing agreement after a long and bitter court fight. The lawsuit was due to CDMA2000, TD-SCDMA, OFDMA, and CDMA200 patents that Qualcomm holds.
According to the 2009 agreement, Samsung would pay $1.3 billion to Qualcomm (which they paid in cash), use Qualcomm processor in the US market, and not sell their Exynos processor to other phone manufacturers. In return, they would get to manufacture the Snapdragon processor and pay the least royalties to use Qualcomm’s patents. Yes, it violates anti-trust laws, and that’s why the South Korean authority launched multiple investigations in the past. However, in 2018, Qualcomm and Samsung entered another undisclosed agreement. That agreement still holds.
In the US, cellular companies use two technologies to build their cellular network, either GSM or CDMA. Verizon, Sprint, T-mobile, and AT&T are the leading cellular companies in the US. Verizon and Sprint use CDMA on their network, whereas AT&T, T-mobile, and rest of the world’s cellular companies use GSM technology.
Besides a processor, a phone needs many other essential parts, including a modem. This modem allows you to communicate with others through a mobile network and makes your handheld device a phone.
If Samsung wants a broader customer base in the US, they need to sell a phone with a modem supporting GSM and CDMA technology. However, Samsung can’t just put a CDMA modem in their phone because Qualcomm holds all the core CDMA patents.
Samsung has two options: either ship a phone into the US with an Exynos processor with a CDMA modem and pay Qualcomm royalties OR ship a phone with Qualcomm’s Snapdragon processor, which has a built-in CDMA modem.
For the US market, the second choice is more economical for Samsung. Therefore, they use Qualcomm processors in the US.
To keep phone price same in different regions:
A few years ago, I attended a Samsung marketing seminar. There they explained why Samsung keeps phone prices the same in different regions. According to their explanation, they do it to stop device smuggling between borders. For example, if Samsung sells a phone at $500 in one country and sells the same phone at $450 in another country, some people would buy the $450 phone and cross border and sell it for $500. They will sneak those phones illegally, avoiding customs.
Here’s a report where a man got busted by Chinese customs officials for smuggling iPhone into mainland China from Hong Kong — Man busted for smuggling 94 iPhones strapped to body.
Samsung’s different region’s sales team compete over who can ship the most device in a quarter. If the phones’ price is not the same, some salespeople will do illegal things to inflate their sales numbers. Therefore, Samsung keeps their phone price of a model the same throughout the world.
But these tactics have a drawback.
Samsung manufactures their phone either in Vietnam or South Korea. The origin-country has a single export tax. However, different country has different import tax. For example, the US has a 0% import tax on the mobile phone, whereas India has a 20% import tax.
Let’s look at an example. If a phone costs $100, including export tax, this phone would cost $100 in the US (0% import tax) and $120 in India (20% import tax). To keep the phone price the same, Samsung has two options.
- Increase the phone price in the US, or
- Decrease the manufacturing cost of the phone that ships to India.
However, increasing the phone price is not a viable option because it will make the phone expensive than competitors, and Samsung would lose market share. Therefore, they need to lower the manufacturing cost.
One fundamental way Samsung lowers the manufacturing cost is by replacing the Snapdragon processor by Samsung’s Exynos processor. Except for the US, the rest of the world uses GSM technology. Therefore, Samsung doesn’t need a Snapdragon processor, and Samsung can comfortably replace it with the Exynos processor.
In short, the Exynos processor lowers the manufacturing cost, and it offsets the import tax. It is why, except for the US and a few European countries, Samsung uses the Exynos processor for the rest of the world.
To diversify processor supply chain:
If Samsung could, it would use the Exynos processor in all of its phones. However, they can’t do it because of the Qualcomm deal.
Samsung makes millions of phones each year. It’s a massive business with numerous parts suppliers involved. If one suppliers’ delay happens, Samsung’s whole phone manufacturing will halt to a standstill. It will be an economic disaster for Samsung Mobile division. Therefore, they diversify their parts supplier. If a problem arises with one supplier, they can fall back to another part supplier. To keep a diversified processor supply chain, Samsung makes the Exynos processor and keeps improving it.
Is Exynos a better processor than Snapdragon?
According to numerous benchmark tests, we saw that occasionally Exynos processor gets a better score than Snapdragon. But getting a better benchmark score does not prove that a processor is better. Multiple times we found that the phone manufacturer cheats on the benchmark score.
Here’s an AndroidAuthority article — Phones we caught cheating benchmarks.
Moreover, a processor is better only if it performs reliably over the years. One most significant drawback of the Exynos processor over Snapdragon is its poor thermal management system. It is why the phones which have the Exynos processor becomes very hot and has inferior battery life. Over the years, this problem gets worse. On the contrary, Snapdragon has a better thermal management system and better optimized for mobile networks.
Though many people argue that Qualcomm processor is better optimized for the US market and that’s why Samsung uses this processor in its US phone, but you can see that that’s not entirely true. In short, First, it’s because Qualcomm blocked Samsung to sell the Exynos processor phone in the US through their patent agreement deal. Second, it’s because the Exynos processor allows Samsung to reduce the phone production cost and diversify its processor supply chain.