Samsung has been struggling to maintain share in the Chinese smartphone market with the company’s market share falling below 1% in recent quarters.
Samsung Electronics has decided to close one of its mobile phone manufacturing plants in China, as its sales plummet in the country amid rising competition from lower-cost local rivals.
The factory, located in northern Chinese city of Tianjin, is scheduled to be shut down by the end of this year.
Announcing the decision, the company said it would offer compensation packages and transfer opportunities to the ~2,600 affected employees. Its other phone manufacturing plant in Huizhou in Guangdong province would remain operational, the company confirmed.
“As part of ongoing efforts to enhance efficiency in our production facilities, Samsung Electronics has arrived at the difficult decision to cease operations of Tianjin Samsung Electronics Telecommunication,” Samsung said in a statement.
According to Korean media, the production capacity of these plants stands at 36 million phones per year for the Tianjin plant and 72 million units for Huizhou plant.
Leaving China to focus on Indian and Vietnamese markets
Samsung’s smartphone business has been facing an existential crisis in China, the world’s largest smartphone market.
Market research firm Strategy Analytics in a report showed that Samsung Electronics accounted for just 0.7% of the Chinese smartphone market in the third quarter of this year with a sales volume of 700,000 units or so.
The company is presently focusing more on the Indian and Vietnamese markets. Considering the lower labour costs, Samsung has moved much of its manufacturing facilities to countries like India and Vietnam in recent years.
Its smartphone manufacturing facilities in Vietnam currently account for approximately 50% of the company’s total smartphone production.
In July this year, Samsung opened the world’s largest mobile factory in Noida, India. However, the company is still a dominant player in the price-sensitive Indian market.