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Smartphone makers look overseas for production

June 11,2014
Korean smartphone manufacturers’ expansion of their overseas production lines in China and Vietnam is negatively affecting the nation’s ICT exports and contributing to reduced exports of completed smartphones from Korea, two ministries said yesterday.

The Ministry of Trade, Industry and Energy and the Ministry of Science, ICT and Future Planning announced that Korea’s ICT exports recorded $14 billion in May, down 7.5 percent compared to the same period last year.

According to data from IT analytics firm IDC, Samsung Electronics took 30 percent of the world’s smartphone sales during first three months of this year, while LG Electronics had about 4 percent.

Korean smartphone makers are already producing a large portion of their products overseas.

Samsung’s factory complex in Gumi, North Gyeongsang, is the only domestic production facility for its smartphones and tablet PCs, according to the company. It also has a factory in Vietnam with a production capacity of about 120 million units per year, and two in China. Samsung invested 2.2 trillion won ($2.2 billion) in March to complete construction on its second Vietnamese plant by year’s end.

When the plant is finished, the company will produce about 40 percent of its total smartphones and 60 percent of its total mobile phones in Vietnam by next year, according to an IT market study released by the Korea Export-Import Bank in late May.

The report said that Samsung aims to produce about 80 percent of its smartphones in Vietnam.

LG Electronics, the nation’s second-largest and the world’s fifth-largest manufacturer, produces more than half of its products at its domestic factory in Pyeongtaek, Gyeonggi. Two of its production lines are in China, one is in Vietnam and another is in Brazil.

Overseas production aims “to boost price competitiveness of devices as the world smartphone market is changing to center around emerging markets, which mainly seek mid to lower-end devices,” the report said.

To match the trend, local smartphone makers are releasing lower-end models more frequently and increasing the variety of their products.

As the electronics giants expand overseas production, exports of phone parts increased for the 20th straight month in May, somewhat offsetting the reduction in exports of completed smartphones. Parts exports in May were at 1.1 billion won, up 7.5 percent compared to the previous month.

Experts say that the changing smartphone market may influence Korea’s ICT exports.

“It’s not a good sign,” said Kim Yoon-zi, a researcher at the Korea Export-Import Bank’s Overseas Economic Research Institute. “Even though exports of cell phone parts slightly increased, they are only a small part of Korea’s ICT exports.”

It is time for Korea to address the overall trend of its electronics industry. Even if numbers of units sold keep increasing, the export amount may drop.”

BY KIM JI-YOON [ jiyoon.kim@joongang.co.kr]





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