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Samsung to close smartphone factory in China's Tianjin amid sales slump

Samsung smartphone Photo: Handout

South Korea's Samsung Electronics will shut down a mobile phone manufacturing factory in the northern Chinese city of Tianjin after a sales plunge in the country where domestic brands like Huawei have gained popularity.

"Samsung has made the difficult decision to cease the operation of the Tianjin Samsung Electronics Telecommunication plant as part of the ongoing efforts to increase the efficiency of our production plants," the smartphone maker said in a statement.

Samsung said that the Tianjin plant, which currently has 2,600 employees, is scheduled to be closed on December 31, 2018. The employees will get compensation packages and be given opportunities to transfer to other factories after the shutdown, the company said.

The strategic adjustment comes after Samsung was hit by a sales slump in China, which is the world's largest market by number of smartphone users.

This year has been particularly challenging, as Samsung's market share in China dropped to less than 1 percent, according to statistics from several market research firms. It strikes a sharp contrast to 2013, when the South Korean smartphone maker controlled 20 percent of the Chinese market due to its superiority in product design.

The sign of the sales sluggishness appeared to show in 2016, when some Chinese users posted pictures of their burnt Galaxy Note 7 handsets on the Internet and claimed that they had exploded. The exposures drew close attention from China's regulators and forced Samsung to recall the problematic smartphones in China.

Besides the safety scandal that has affected its sales performance, Samsung also faces fierce competition from domestic rivals like Huawei, which surpassed Apple to become the world's second-largest smartphone maker this year.

In the third quarter of this year, Huawei ranked third with 15.9 percent market share in China's mobile phone market, following Vivo and Oppo, with Samsung down to just 1 percent market share in the country, according to statistics from Sino Market Research.

In August, South Korea's Electronic Times reported that Samsung was considering closing its Tianjin plant and planning to shift focus to Southeast Asia's emerging markets such as India and Vietnam due to a sales slump and rising production costs.

In July, Samsung opened the world's largest mobile phone production facility on the outskirts of New Delhi, the capital city of India, where China's Xiaomi has been building its presence with low-priced smartphones.

However, the South Korean giant still attaches importance to the Chinese market. "China remains an important market for Samsung and we are actively participating in China's economic policies by boosting growth in the components industry. We will continue to provide superior products and services to Chinese consumers while contributing to local communities," the company said in the statement.

Samsung also stressed that it will continue the operation of its production plant in Huizhou, a city in South China's Guangdong province, in demonstration of its bet on China.

The annual production capacity of the Tianjin and Huizhou plants accounts for about 20 percent of the total output of Samsung's smartphones.
 


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