"I think another problem with outsourcing is both partners have to "win" in the relationship"
I agree. Vertical integration has it's own merits where there are lesser formalities involved compared to a relationship between two companies. This can make it faster to roll out new products in the market.
I think an important decision that vertically integrated companies have to take is whether to sell a raw component as it is or us it to make it's own finished products. For instance, if there's a limited number of OLED screens that Samsung can manufacture, would be more profitable to sell them as it is to other manufacturers, or would a better option be to use them in Samsung's own smartphones and tablets. Many a times it may be a very difficult decision to make.
As Ken points out, Samsung is an example of cautious vertical integration. Right now Samsung is struggling, but the model has worked pretty well. Samsung's LCD business was its biggest asset until LCDs became just another commodity product. The spinoff should help offset that and retain Samsung Display as a supplier. And, if competitors start clamoring for OLEDs, Samsung is in the drivers'seat--it can either supply OLED to itself or charge top dollar to its competitors.
You have to have a superior, in-demand technology for vertical integration to work, but there are a number of examples to show that it does.
In my opinion , to be a successful vertically integrated product company , you need to have a long time vision, commitment, deep pockets and some say in the government to keep the policies and taxation in your favour. So a company's aim should be to become a national icon or an object of pride - the way AT&T ( Ma Bell) or GM or Ford were once upon a time.
Generally that's true, but inasmuch as a component adds value to a product, the component manufacturer can negotiate a better deal for itself. Look at the tablet designs driven by Intel's processor architecture.
I think another problem with outsourcing is both partners have to "win" in the relationship. I think this makes companies risk-averse. A vertically integrated compnay may be more willing to spend money on something that will pay off in the long run, rather than attaching a value to it at the outset.
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