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Samsung shuts Tianjin mobile phone plant amid shrinking market share in China
Facing a diminishing market share in China, Samsung has shut its Tianjin mobile phone factory, with 2,600 employees there either accepting compensation packages or being transferred to other Samsung facilities locally.

The shutdown comes just several months after the consumer electronics giant dissolved its factory in Shenzhen, China’s manufacturing hub. The South Korean tech conglomerate has said that its only remaining Chinese phone plant in Huizhou, Guangdong province will remain open.

Samsung cell phones used to dominate the Chinese market with every flagship product becoming big sellers instantly after the release. However, over the past five years, Samsung’s market share has slumped from 20 percent to just around 0.8 percent under fierce competition from iPhone and China’s emerging domestic brands like Huawei and Xiaomi. It’s reported that among the 500 million handsets sold in China last year, Samsung only accounted for around 10 million.

Chinese media reportedly have attributed the downturn to Samsung’s alleged “differential treatment” of Chinese consumers in the battery explosion scandal in 2016.

At the beginning of September 2016, dozens of battery combustion complaints related to its Galaxy Note 7 model were filed worldwide, prompting the company to suspend the phone’s sales and soon make a massive global recall. Surprisingly, the Chinese market was not included in the recall at first. Although Samsung decided to recall the flawed products from China later, consumers in the market were angry for being ignored at first.

Actually, as the quality problem of Samsung’s Galaxy S3 began to surface globally, the South Korean company had been accused of cold-shouldering Chinese consumers—when buyers from other countries could have their phones either replaced or repaired for free, Chinese had to spend over 1,000 yuan for their handsets to be fixed.

Later, the Civil Aviation Administration of China (CAAC) banned Galaxy Note 7 on flights, which further eroded the confidence of potential Chinese consumers in the brand.

Despite the setbacks in the Chinese market, Samsung remains the world’s largest mobile phone vendor. Based on Gartner’s Q3 report on global smartphone market, Samsung totally sold 73.36 million sets worldwide, with an annual decline of 14.3 percent.

"Samsung faces slowing global smartphone demand and ever-growing competition from Chinese manufacturers," said Anshul Gupta, research director at Gartner. In the second quarter of 2018, Huawei surpassed Apple to become the second-biggest smartphone vendor globally for the first time, according to Gartner.

The Samsung Tianjin plant was a joint venture established in March 2001, with a registered capital of $104 million. Samsung Electronics Co., Ltd. held 90 percent of the shares, with the Tianjin municipal government holding the remaining 10 percent.

Although Samsung’s smartphone business is now facing challenges, its semiconductor product business is on the rise. In 2017, Samsung surpassed Intel Corporation as the world’s biggest chipmaker for the first time, 25 years after the latter’s dominance of the sector. On August 8, Samsung Group announced to invest around $22 billion into new areas including artificial intelligence, 5G mobile technology, automotive electronic components and bio-pharmaceuticals.

Although two of the company’s three mobile phone factories in China have been closed, the move is being interpreted as “strategic restructuring”. Due to the rise in labor cost, the company is reportedly moving the plants from China to Vietnam and India. Meanwhile, it announced plans to invest another $2.4 billion in Tianjin for emerging businesses like battery.

Around China, Samsung has around 60,000 employees working for its localized system of design, research & development, procurement, production and after-sales. Based on its official data, by 2018, the conglomerate has 7 sub branches, 14 production bases, and 10 R&D centers in China.   

 


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