Why Samsung Closed One of Its Chinese Phone Factories


Jan. 4 2019, Updated 9:00 a.m. ET

Enhancing factory efficiency

Samsung (SSNLF) shut down operations at its phone manufacturing plant in the Chinese city of Tianjin on December 31, Caixin Global has reported. Samsung’s decision to close down the factory was reported in early December, with the company saying the decision was part of its ongoing efforts to enhance efficiency in its production facilities, according to Reuters.

It’s unclear at the moment what Samsung might save in costs by shutting down operations at the Tianjin plant. Samsung’s operating expenses were $15 billion in the third quarter, down from $17 billion a year earlier. Ericsson (ERIC) and Nokia (NOK) incurred $2.3 billion and $1.8 billion in operating expenses, respectively, in the third quarter. Samsung made a $12 billion profit in the quarter.

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Samsung shrinks its manufacturing base in China

Samsung’s Tianjin factory operated for nearly 20 years, and its closure leaves Samsung with just one smartphone manufacturing base in China: the plant in the Chinese region of Huizhou.

Samsung is shrinking its phone manufacturing base in China at a time when the company’s share of the Chinese smartphone market has also diminished. Samsung’s share of China’s smartphone market has dropped to less than 1.0% according to data from Counterpoint. A few years ago, Samsung was the top smartphone company in China. It has since been overtaken by domestic Chinese phone manufacturers such as Huawei and Xiaomi, as we can see above.

5G-capable smartphone

Samsung is working on bringing a 5G-capable smartphone to market this year. In addition to its regular phone making operations, Samsung also recently picked up direct orders from Verizon (VZ) and AT&T (T) to supply them with smartphones that can run on their 5G networks. Verizon and AT&T began offering 5G services in pockets of the United States toward the end of 2018.


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