Samsung Close One Mobile Plant In Tianjin, China

Samsung Electronics announced that it will shut down one of its cell phone factories in the north of China, in the city of Tianjin.

The company made this decision because its smartphone sales in the largest market in the world have gone down, which is attributed to the rise of local rivals that make cheaper smartphones. According to Counterpoint, at the end of the first quarter of this year, Samsung’s market share in China has shrunk to 1 percent from 15 percent in 2013, losing customers to local brands such as Huawei.

Samsung's Tianjin plant

The company said it is spending efforts to maximize the efficiency of its production facilities, resulting in such a difficult decision to discontinue operations in Tianjin, China.

Currently, there are around 2,600 people working in the Tianjin based Samsung plant, which is set to close by year-end.

The Korean smartphone maker promised to provide workers with compensation packages along with opportunities to work at other plants of Samsung. In addition, it said the other Samsung factory which is located in Huizhou, Guangdong, in the south of China, will continue operating.

The company has chosen to place its production plants in countries like India and Vietnam, where the labor cost is lower.

Hyundai Motor Securities senior analysts, Greg Roh, explained that there’s no point for Samsung to maintain its production in China since the labor cost here is increasing, as opposed to the inconsiderable market share. Focus the manufacturing process in Vietnam and India is a better plan for Samsung.

According to Electronic Times, the South Korean newspaper, while Samsung’s factory in Tianjin makes 36 million cell phones annually, the one in Huizhou produces 72 million phones. However, two Vietnam based plants of the company make a total of 240 million mobile phones each year. Samsung refused to reveal each plant’s capacity.

As stated by Samsung, China is still a critical market for the company and it's actively taking part in the economic policies of China by promoting the development of the components industry.