Caixin
Jun 05, 2019 04:54 AM
BUSINESS & TECH

Samsung Cuts Jobs at Its Last Smartphone Plant in China

Samsung is shrinking its workforce for smartphone manufacturing in China. Photo: VCG
Samsung is shrinking its workforce for smartphone manufacturing in China. Photo: VCG

Samsung, the world’s largest smartphone producer, is cutting jobs at its last phone manufacturing facility in China, reflecting slowing sales and heating competition in the No.1 smartphone market, Caixin learned.

The layoffs at Samsung’s plant in Huizhou, Guangdong province, are being carried out on a voluntary basis. Employees agreeing to leave with compensation will need to sign up by June 14, according to a company document seen by Caixin. It is unclear how many people will be affected by the job cuts.

Samsung faces rising costs and stiffer competition in China. Meanwhile, the global smartphone market is slowing after years of rapid expansion. In 2018, worldwide shipments of smartphones declined 4.1% to 1.4 billion units, according to market information provider IDC. Shipments by Samsung dropped 8% to 292 million units, although the company remained the largest smartphone vendor in the world.

The Huizhou plant is Samsung’s last smartphone manufacturing facility in China after the South Korean company closed its smartphone plant in Tianjin in December. In April 2018, Samsung shut down another plant in Shenzhen.

Speculation swirled since May that Samsung would shut down the Huizhou plant and relocate the smartphone manufacturing lines to Vietnam, several workers at the Huizhou plant told Caixin. The factory stopped recruiting new workers since March, one employee said.

But a manager of the Huizhou plant told Caixin that there is no plan for closure and the factory is operating normally. “We have never heard about the closure of the plant,” the manager said.

Samsung didn’t respond to Caixin’s questions about the layoff and the company’s smartphone business in China.

Samsung opened the Huizhou plant in 1992 and has been making cellphones there since 2006. In 2017, the factory hired more than 6,000 workers to produce 63 million smartphones, about 17% of Samsung’s global production that year.

But in a company meeting in late May, managers told employees that a voluntary layoff would be carried out as production in the plant decreases, according to an employee.

Samsung is facing greater challenges in China as domestic rivals catch up. Last year, despite the global slowdown, smartphone shipments by China’s Huawei Technologies and Xiaomi Corp. both jumped more than 33%. Domestic budget phone makers like OPPO and Vivo are also rising quickly.

In 2018, Samsung accounted for 0.8% of total smartphone sales in China with 3.3 million handsets, declining from a 20% market share in 2013. The share slightly revived to 1.1% in the first quarter this year. China, once Samsung’s largest overseas smartphone market, has slid to a marginal role behind India, the U.S., Brazil, Indonesia and other markets in the Middle East and Africa.

While sales have been squeezed, Samsung is also facing growing production costs in China. In Huizhou, the average monthly wage has surged to 5,690 yuan ($822) in 2018 from 1,894 yuan in 2008.

Samsung has sought to shift part of its smartphone manufacturing capacity to Vietnam since 2009. The southeastern Asian country now contributes 40% of Samsung’s global smartphone production.

Contact reporter Han Wei (weihan@caixin.com), Isabelle Li (liyi@caixin.com)

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