[ET NEWS] Samsung Electronics is considering shutting down one of its two smartphone plants in China within the year amid lukewarm sales and soaring labor costs, according to industry sources on Aug. 13.
Sources say Samsung plans to suspend operations at Tianjin Samsung Telecommunication (TSTC) in Tianjin, northern China, as early as from next year. The firm has already informed the plans to key suppliers.
“Samsung says there will be no more orders from Tianjin,” an industry source told ET News on condition of anonymity. “That means suspending production there.”
The Tianjin plant, established in 2001, used to play a key role as Samsung’s global production hub with sales exceeding 15 trillion won (US$13.20 billion) in 2013. But its role has been reduced in recent years as the Korean tech giant is increasingly turning its eyes to other emerging markets like Vietnam and India.
With Samsung losing its market share to Chinese runner-ups in recent years, the plant’s sales also tumbled to 11.41 trillion won in 2014 and 6.93 trillion won in 2015. Due to slowing sales, the Chinese unit is not subject to financial disclosures as of the third quarter 2016.
Along with the Tianjin plant, Samsung also operates a smartphone production plant in Huizhou, southeastern China.
While reducing production in China, Samsung is beefing up operations in other key markets. The firm built two plants in Vietnam with cheaper labor than China and a second plant in India in July.
“We have reduced production at the Tianjin plant and will continue to do so in the future. But we have not yet decided on its shutdown,” said a Samsung executive who also wished to be unnamed.
By Yoon Kun-il and Kwon Kun-ho
This story was co-produced by ET News and The Investor.