Samsung shuts its last Chinese phone factory

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Samsung shuts its last Chinese phone factory

Samsung Electronics closed down its last remaining phone factory in China.

The company confirmed Tuesday that the manufacturing facility in Huizhou, Guangdong Province, made its last phone on Sept. 30. Signs that Samsung was preparing to end production surfaced in June when it laid off staff.

The Korean company shut another phone factory in China in Tianjin in December 2018. Established in 1992, the Huizhou factory employed up to 6,000 workers and made more than 60 million phones a year as of 2017.

Samsung said the shutdown was part of a “global production adjustment.”

Successfully challenged by Chinese phone makers like Huawei and Xiaomi, Samsung’s share in the Chinese market has been rapidly declining, dropping to below 1 percent last year from 20 percent in 2013. Rising labor costs is another factor making China less attractive for production.

As for smartphone production previously handled by the Huizhou factory, Samsung has two options: increase the number of original design manufacturers (ODM) in China or turn to its factories in Vietnam and India, where the company has been heavily investing in the last few years.

Samsung President Koh Dong-jin, who heads the company’s mobile business, suggested at an August press conference that the company will gradually increase ODM production.

If ODMs can fulfill “Samsung’s criteria,” it’s reasonable to outsource production to them, he said.

The Galaxy A6s, a phone released in the Chinese market last November, was Samsung’s first ODM phone. It is a Samsung phone but made by Zhejiang Province-based Wingtech.

According to IHS Markit, 3 percent of Samsung’s phones were ODM products last year. It forecast this figure to reach 20 percent next year. In an ODM arrangement, suppliers are not just manufacturers that follow product orders; they are also responsible for development and design. The news raises uncertainty for Samsung’s domestic parts suppliers.

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