Samsung further slashes mobile business in China, shifts to India

Samsung Electronics will further downsize its ailing smartphone business in China while seeking to expand growth in India, according to the industry on Wednesday.

The world’s top smartphone vendor is reducing the workforce of its only mobile device factory in Huizhou, Guangdong province, reported Chinese English-language media outlet Caixin.

The size of the reduction has not been confirmed, though the Chinese report said layoffs are being carried out on a voluntary basis, with employees’ agreement on compensation to be signed by June 14.

The Huizhou plant opened in 1992 and started producing phones in 2006.

The plant hired more than 6,000 workers to manufacture about 17 percent of Samsung’s global production in 2017, according to the report. 

Meanwhile, Samsung’s headquarters in Seoul said its China entity has been restructuring the mobile set business due to declining sales over the years.

“As part of improving efficiency in management of the China business, it is a natural step to reduce the workforce at the remaining production facility,” a Samsung official. “The latest figures of employees and production capacity have been decreased, and the layoff size is not being confirmed.”

Samsung ran two smartphone plants in China. But it shut down one in Tianjin late last year due to falling profitability.

The latest downsizing of the production workforce in Huizhou raises speculations that the company could close the remaining plant and pull out from the world’s biggest phone market.

“It’s not decided yet what will come next,” the official said.

Even though Samsung has been the world’s largest smartphone provider, its presence has been weak in China.

The company took a 0.8 percent share of the Chinese smartphone market, shipping 3.4 million units in 2018, which dropped the Korean firm out of the top 10, according to data from Strategic Analytics.

On the other hand, Huawei topped the Chinese market with a 25.8 percent share, followed by Oppo with 20.3 percent, Vivo with 19.5 percent and Xiaomi with 12.1 percent.

Samsung’s US archrival Apple was the fifth-biggest player in China with an 8.2 percent share.

Despite the global success of the Galaxy S10 series, its China market share stood at 1.1 percent in the first quarter of this year.

In light of the circumstances, the Korean tech giant is turning to India, the largest market after China.

After finishing its new production facility for smartphones in Noida in August 2018, the company is considering additional investments in relation to displays and battery backing for mobile devices, according to Indian news reports.

The Noida plant has annual capacity of producing 120 million units.

“The company’s India strategy is to focus on the domestic market first and then expand the production capacity for exports to other countries,” the Samsung official said.

Including the factory in India, Samsung currently runs six production facilities for smartphones worldwide, with one in Gumi, North Gyeongsang Province of Korea.

If the company decides to close the Huizhou plant, it is likely that the Noida facility will take over the export volume.

“For the restructuring in China, another major factor is that the global smartphone market is facing stalled growth,” the official said. “How the exports volume will be covered by other factories is undecided.”

By Song Su-hyun (song@heraldcorp.com)