Wednesday, 5 June 2019


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Song Jung-a in Seoul YESTERDAY Print this page8 Samsung Electronics is cutting production and laying off workers at its only remaining smartphone plant in China amid slowing sales as it continues to shift production to lower-cost Asia locations. The move at Samsung’s plant in Huizhou city, Guangdong province, comes as the South Korean company struggles to compete against Chinese rivals offering cheaper but competitive smartphones. Samsung has only about 1 per cent market share in China, down from about 20 per cent in 2013, according to Strategy Analytics.  To counter rising labour costs in China, Samsung has been shifting smartphone production from China to Vietnam and India in the past decade. Analysts expect the Sino-US trade war to accelerate that shift.  “Due to challenging market situations and intensified competition in China, we are currently adjusting production volume at Samsung Electronics Huizhou,” the company said in a statement on Wednesday. It did not provide any details. Analysts expect Samsung to eventually shut the plant as the company is unlikely to reverse its flagging fortunes in China. CW Chung, a Nomura analyst, said: “In the past, Samsung needed smartphone plants in China because of lower wages and its huge market there. But such merits no longer exist and Samsung has no reason to keep producing phones in China.”  On Wednesday, the world’s largest smartphone maker said that no decision had been made on whether to close the Huizhou plant, which opened in 1992. The factory had more than 6,000 workers to produce 63m smartphones in 2017 or 17 per cent of Samsung’s global production that year, according to Caixin, a Chinese financial news magazine. Despite a positive reception for its latest premium model, the Galaxy S10, which went on sale in March, Samsung’s sales have continued to fall in China — the world’s largest smartphone market, accounting for about a third of units sold worldwide, according to IDC. Strategy Analytics estimates that Samsung sold 1m smartphones in China in the first quarter of the year. Recommended Samsung Electronics Co Ltd Huawei blacklisting creates opening for Samsung’s 5G push Lee Seung-woo, an analyst at IBK Securities, said: “Its phone sales there [in China] recovered slightly earlier this year but it is hard to expect a big improvement.”  Analysts said moving production out of China would not have a big impact on Samsung’s global phone production and sales. The company closed its smartphone plant in Tianjin in December after shutting down a factory in Shenzhen in April last year. The remaining Huizhou only makes phones sold into the local market. Samsung now produces about half of its global phones in Vietnam, where its factory began operations in 2009. Last year, it opened the world’s largest mobile phone factory in India to tap into the surging smartphone market there.  The global smartphone market is slowing, with worldwide shipments falling 4.1 per cent to 1.4bn units last year, according to IDC. Samsung’s shipments also fell 8 per cent to 292m units. Despite the global slowdown, Chinese smartphone makers Huawei and Xiaomi have seen their shipments surge by more than a third.

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