Rising labor costs, economic slowdown, and fierce competition means Samsung will now only sell, rather than manufacture phones in China.
There seems to be a general shift away from manufacturing products in China, and it’s not simply because President Trump demanded US companies move production elsewhere. The latest company to exit China also happens to be the largest phone maker in the world.
As Reuters reports, Samsung this week announced that it will no longer manufacture phones in China. The official reason given is one of efficiency gains, but there seems to be a number of factors as to why Samsung, like others recently, are leaving China.
Labor costs are rising there, the economy is slowing down, and the tariffs on phones made there heading to the US are surely helping to shape these decisions. Samsung’s phone market share in China has also fallen to just one percent, with Park Sung-soon, an analyst at Cape Investment & Securities, explaining, “In China, people buy low-priced smartphones from domestic brands and high-end phones from Apple or Huawei. Samsung has little hope there to revive its share.”
Samsung is closing its one remaining Chinese phone factory located in Huizhou and moving the production equipment it houses to other locations, while Sony has already decided to close its phone factory in Beijing. In August, Google was also reported as deciding to move hardware production outside of China, with the likely new destination being Vietnam. Samsung already has a manufacturing base there.
For China, the negativity generated by major brands moving production elsewhere will be countered by the fact Chinese brands seem to be doing so well. In the phone space that includes Huawei and Xiaomi. Meanwhile, Apple continues to have a strong manufacturing base in China through its close links with Foxconn. However, Foxconn has stated that if it needs to, all iPhones could be made outside of China.