Samsung recently announced that it stopped mobile phone production in China, Reuters reports. The reason for the company’s decision is due to the increase in competition from domestic rivals.
Samsung’s share of the market in China shrank from 15 percent (in mid-2013) to one percent in this year’s first quarter, losing to “fast-growing homegrown brands,” including Huawei Technologies and Xiaomi Corp. Reuters says, pointing to market research by Counterpoint.
Additionally, Samsung shut down its last phone factory in Huizhou, China after production was cut in June, and another factory was suspended late last year. This underscored “stiff competition in the country,” Reuters says. The factory, which was built in 1992, employed 6,000 workers. It also produced 63 million units, and manufactured 394 million handsets around the world in 2017, according to its annual report.
“In China, people buy low-priced smartphones from domestic brands and high-end phones from Apple or Huawei. Samsung has little hope there to revive its share,” Park Sung-soon, an analyst at Cape Investment & Securities, told Reuters.
Production of Samsung technologies will be moved to lower-cost manufacturing sites across the globe, including Thailand, India and Vietnam. Other tech companies, like Sony and Inventec Corp., are also moving production from Chine due to “rising labor costs and the economic slowdown.”
Not Everyone is Leaving
While some tech giants are pulling manufacturing out of China, others are staying, and some are even moving in.
For example, Philips, an electronics and technology multinational company, is moving production of its ultrasound equipment to China, while also producing respiratory masks in the U.S. That way, the company will be able to reach consumer demands in both countries while also bypassing import tariffs, the China Briefing says.
Plus, Apple is and will continue to make its major products in China, too (although it has been considering a move to the U.S., and to other lower-cost countries). Finally, while it is taking production elsewhere, Samsung will continue sales in China.