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Samsung has ended mobile telephone production in China hurt by competition from domestic rivals in the world’s biggest smartphone market.The shutdown of last China phone factory comes after it cut production in the last two factories.
Technological giant Samsung Electronics Co Ltd announced it halted its mobile telephone production in China.
The reasons are, as said by the company, big competition on the Chinese market where domestic producers are taking a huge bite. It all started in June this year when the company had to cut production at the plant in Huizhou. Also, late last year they had to close a factory as well.
South Korean company had also problems related to rising labor costs in China and the economic slowdown in this country tackled by US-China trade war as well. However, the company is not the only one. Sony announced closing of their Beijing operations as well saying they will continue production in Thailand.
Still, even though US President Donald Trump is doing everything to reduce Chinese production for the American smartphone giant Apple, the truth is that this company is still relying much of its production exactly there.
During the first quarter of the year, Samsung’s share of the Chines market decreased to 1%. Just for comparison, back in 2013, the market share accounted for more than 15%. However, during the last few years, other local producers took the bigger challenges that resulted in companies as Xiaomi and Huawei growing at a much faster pace.
An analyst at Cape Investment & Securities, Park Sung-soon noted that in China, people are generally buying either low-priced smartphones from domestic brands or high-end phones from Apple or Huawei so Samsung has “little hope there to revive its share.”
From the company, they said that it was an enormously difficult decision for them to leave China production but that they had to do it in order to boost efficiency. It added, however, it will continue sales in China.
As per the statement:
“The production equipment will be re-allocated to other global manufacturing sites, depending on our global production strategy based on market needs.”
The Huizhou plant was built back in 1992 but the company didn’t want to elaborate its capacity or number of staff. Be it as it may, a South Korean media said it employed 6,000 workers and was making 63 million units in 2017.
According to the company’s annual report, back in 2017, Samsung produced 394 million handsets around the world but in the last few years, it has expanded smartphone production in lower-cost countries, such as India and Vietnam.
However, we shouldn’t forget to stress out that Samsung had its problems with Chinese factories. Back in 2012 In June 2012, China Labor Watch (CLW) published an investigative report on ten supplier factories for both Apple and Samsung.
They were investigating the fact that the treatment of this corporation’s manufacturing workers was far from the ideal with the long the list of illegal and inhumane violations including over 100 hours of forced overtime work per month, unpaid work, long-standing hours, underage workers, age and gender discrimination, non-existing worker safety, as well as verbal and physical abuse.
Samsung now was forced to close all 12 factories that it directly owned and operated in China but there is no guarantee that it won’t be making the same mistakes in other developing countries.
In June this year, the company said to invest $116 billion over the next decade or so to take on Intel Corp. and Qualcomm Inc. in the business of making advanced chip processors, quickening an effort to take greater control of the global semiconductor industry. At the time of writing, Samsung stock was down by 2.56% to 47.600 wons.