Samsung recently announced plans to shut down its last remaining Chinese-based television factory in November. Earlier this month, the South Korean conglomerate revealed it would sell its interest in a Suzhou liquid crystal display (LCD) production facility to TCL Technology Group, Corp.
The electronics giant likely took action as part of its larger supply chain diversification strategy.
Samsung Shift Away From Chinese Production
Samsung’s only remaining China-based TV plant is located in the northern city of Tianjin and currently employs around 300 people. The corporation informed a Sino news outlet it would retain some of the facility’s equipment and staff following its closure. Reuters reported the brand said it is shuttering the factory as part of “ongoing efforts to enhance efficiency.”
The Tianjin manufacturing site is only the latest Chinese centered plant Samsung has wound down recently.
In 2019, the firm closed a smartphone factory it maintained in Huizhou. In doing so, the brand ended its handset manufacturing efforts in the East Asian country. At the time, the company blamed the plant shutdown on the sluggish global economy and increasing local labor costs. It also ceased operations at its Suzhou-based computer production and assembly center last year.
In addition, Samsung shuttered its Tianjin mobile device factory and its Shenzhen networking gear complex in 2018.
At present, the conglomerate only has a handful of manufacturing sites left in China; semiconductor fabrication facilities in Suzhou and Xian and a Suzhou home appliance plant.
A Change in Strategy
Although Samsung has ramped up its withdrawal from China in the last few years, its production capacity diversification initiative is not new. The Financial Times reported last year the brand had a long-term plan to make its supply chain more geographically diffuse.
The corporation’s new strategy saw it launch a $2.5 billion complex in Vietnam in 2008 and a $5 billion factory in the country in 2013. The firm determined the area’s robust tax breaks and affordable labor make it an ideal production hub.
The conglomerate has other reasons to reduce its manufacturing presence in the region. For example, the firm had a 15 percent share of the local mobile device market in 2013. However, the popularity of recent offerings from Apple, Huawei, Oppo, and Xiaomi cut its market share to 1 percent by 2019.
Samsung declared its intention to exit the LCD business in March. These days, the company is focused on developing quantum dot light-emitting diode (QLED) displays, so it does need not outmoded factories among its assets.
There is also the matter of the multi-year U.S.-China trade war. As the two superpowers have exchanged tariffs and export controls, moving electronic devices between them has become increasingly challenging. Samsung’s observation of that reality likely informed its decision to build a microelectronics supply chain in South Korea.
With the holiday quarter fast approaching, the conglomerate probably will not close any more of its Chinese facilities. The firm would harm its near-term revenue by disrupting its core products supply chain right now. But in 2021, Samsung’s diversification strategy implementation will likely continue with more plant shuttering and further global expansion.