Samsung to shutter Tianjin phone factory

Samsung Electronics will halt operations at its manufacturing facility in Tianjin, China, by the end of the month, the company said Wednesday.

The Tianjin plant was one of two smartphone factories the company had in China, along with one in Huizhou, Guangdong Province.

Rumors that Samsung is looking to close down the Tienjin factory first appeared in August when a state-owned Chinese media outlet reported that the tech giant was considering pulling out due to higher labor costs and a fall in demand for Samsung phones in the country.

According to market research firm Strategy Analytics, Samsung Electronics’ share in China’s smartphone market fell below 1 percent this year. Hit hard by the rise of strong Chinese brands like Huawei, OPPO and VIVO, Samsung’s share of the Chinese market has plummeted in recent years - in 2013 it was the No. 1 brand with a market share of 20 percent.

A Samsung spokesman explained that the decision was part of an effort to improve production efficiency.

“We expanded factories in the past, but the smartphone market isn’t booming as it used to, so we’re closing it down as a way to enhance our production efficiency,” he said.

When Samsung’s president and head of the IT & mobile communication division Koh Dong-jin was asked by reporters last month about the rumors that the Tienjin factory would be closed down, he replied that “there were no fixed decisions made,” but that the company would “react flexibly to the market situation.”

The spokesman added that the company will still be able to meet smartphone demand in China, with the Huizhou factory still running and factories in neighboring countries like Vietnam there to help. In the last two months, Samsung unveiled mid-priced smartphones A6s and A8s to target Chinese consumers.

Industry watchers say Samsung is turning to other countries like Vietnam and India, where labor costs are cheaper. Half of its global smartphone production already comes from Vietnam. In India, where the smartphone market is growing at the fastest speed, Samsung has expanded its facilities this year, nearly doubling production.

Samsung has smartphone plants in Vietnam, India, Brazil and Indonesia.

BY SONG KYOUNG-SON [song.kyoungson@joongang.co.kr]