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By Baek Byung-yeul
Samsung Electronics is implementing a voluntary retirement program at its last remaining smartphone manufacturing plant in China to cope with sluggish sales and intensifying competition there, the company said Wednesday.
The move is seen as a first step toward closing its last plant on the mainland and moving production lines to Vietnam, according to an industry expert.
"Samsung is receiving voluntary resignations of its employees at its Huizhou plant in China," an official of the firm said. The personnel reduction is being done on a voluntary basis and employees who agree to leave with compensation will need to sign up by June 14.
The official said the firm made the decision as it is currently adjusting its smartphone production volume. "Due to a challenging market situation and intensified competition in China, we are currently adjusting production volume at Samsung Electronics Huizhou," the official said.
When asked whether this is the first step of shutting down its smartphone factory in China, the official declined to answer, saying "nothing has been decided about it."
Facing rising labor costs and increasing competition in China, it has been years since Samsung has been pushing forward plans to move its smartphone manufacturing base to Vietnam. Now the firm has about half of its entire smartphone production at its Vietnamese production lines in Bac Ninh and Thai Nguyen.
"Given Chinese phone makers have narrowed the technological gap between them and Samsung and the Korean firm has been struggling to sell its smartphones to Chinese consumers, it looks like the Chinese market holds little attraction for Samsung. Due to the increasing labor costs there, Samsung will eventually close down its Chinese factory," said Prof. Lee Suk-geun, executive director for the Sogang Social Enterprise Leader Program of Business School of Songang University.
Samsung, the world's largest smartphone maker, has been facing a bleak outlook in its smartphone business both in China and internationally. After years of expansion, global smartphone shipments are decreasing from 2018. According to recent data by industry tracker Canalys, the smartphone shipments of 2019 are estimated to be 1.35 billion, a 3.1 percent decrease year-on-year.
The firm has been facing bigger challenges in China due to fast-growing Chinese phone makers such as Huawei, Oppo and Vivo. While its market share in the world's largest smartphone market was at about 20 percent in 2013, the figure plunged to 0.8 percent in 2018.
Opened in 1992, the Huizhou plant is Samsung's only smartphone manufacturing plant in China after the firm ceased operations of its Tianjin factory at the end of 2018. Samsung also closed down another plant in Shenzhen in April that year.
Samsung has been producing cellphones at the Huizhou plant since 2006. The factory had more than 6,000 employees as of 2017 to produce about 63 million smartphones.
