Samsung closed the factory in China, ‘world factory’ is about to expire?

Samsung has planned to close its last factory in China, raising concerns about the position of the world’s most populous country in the global supply chain. In the heyday, the Samsung factory complex in Huizhou, north of the Pearl River Delta, was the largest industrial production area that the Korean corporation ever built. It provides one fifth of all phones sold in China in 2011. However, after 27 years, the factory complex has been temporarily suspended for a long time. The notice posted at the gate indicates the hiring of employees has been stopped since February 28. Samsung’s last factory In fact, since the Chinese New Year, the local people have heard rumors that Samsung has stopped production in the coming months, “said Zhong Ming, a resident of Huizhou City. He witnessed the growth of the factory for three decades. After closing the Tianjin facility in December and discontinuing the production of network equipment in Shenzhen, the Huizhou factory was Samsung’s last “base” in China. Engineer Steve Huang said: “The street lights here were decorated with Samsung ads. But now everything is gone. ” Huang has been working in the factory for 17 years and is very worried about the current situation. The number of employees has dropped to about 4,000 compared to 9,000 in 2013 – the time Samsung ranked first in China with 20% of the smartphone market share. Last year, its market share fell to only 1%, due to stiff competition from domestic rivals such as Huawei, Xiaomi and Oppo. Huizhou factory went into operation on August 24, 1992, when the electronic giant signed a joint venture contract with the city government. A few days later, Korea – China officially established diplomatic relations. “World factory” losing position? 2011, when Samsung was the world leader in smartphone sales, factories in Tianjin and Huizhou produced 55.84 million and 70.14 million mobile devices respectively. Facing the risk of closing the factory, the local people exchanged Samsung compensation information from 1,400 USD – 14,400 USD for employees, depending on the year of work. “Room rents here dropped from 500 to only 200-300 yuan. But it is still vacant, ”the people said. Samsung declined to comment on the incident, although the company’s production cut in Huizhou was reported by many Chinese newspapers, even Korean. In the first quarter of 2019, Samsung phone exports from Huizhou dropped by 20.1% over the same period last year, according to Chinese customs data. The departure of Samsung from the world’s most populous country has raised concerns about China’s economic future and its role in the global value chain. Especially in the time of commercial war boom. In fact, Samsung is still expanding its production in Vietnam and India. Particularly in Vietnam, Samsung has 4 factories, contributing a total revenue of about 67.15 billion USD and a profit of about 4.7 billion USD in 2018. The shift from China to Southeast Asia, India and Africa has been going on for the past decade, mainly due to rising labor and tax costs. This process has been accelerating since the US imposed high tariffs on Chinese products last year. Foxconn, the iPhone and iPad processing unit, said this week it has the capacity to meet the production of Apple devices outside China. Some US companies such as Oracle and Cisco also plan to cut production in China. “Samsung is currently the world’s leading manufacturing enterprise. If the company narrowed or left China, at least 100 factories of supplier units in Guangdong will also close, ”said President of Contemporary Observatory Liu Kaiming. “Without Samsung Huizhou factory, they will be hard to survive”. Evidence is that Berni Optical, a company that makes the base glass for Apple and Samsung, was forced to lay off 8,000 workers since November due to reduced orders. Janus, the Dong Quan-based component maker, also reported a 14.25% decrease in sales last year, resulting in a 2.86 billion yuan ($ 413 million) loss. The company said Samsung has stopped placing orders since the fourth quarter of 2018. What did China do? In response to this move, the Chinese government tried to resolve complaints from foreign manufacturers by promising them to be welcomed and protected. Beijing has urgently passed the Foreign Investment Law this year to legally protect intellectual property licenses, as well as prohibit compulsory technology transfer. Official Chinese data showed that foreign direct investment flows remained stable in the first 5 months, with a 3.7% increase to $ 55 billion. Before the global supply chain change, Wang Jisi, a US-China relations expert, said China needs to avoid falling into a trap separate from the US and the rest of the world. “Some people want to see China’s commercial independence, but the country should maintain relationships with other countries in the technology field,” Wang said. Earlier this month, the Ministry of Industry and Technology of China approved a license to provide 5G services to a number of domestic operators – demonstrating the superiority of its telecommunications infrastructure. However, researcher James Yan insists that this effort is only theoretically feasible. The development of Chinese technology – telecommunications still has to be compatible with the world.