Samsung to Close China Based Smartphone Assembly Facilities
October 01, 2018
Samsung Electronics has five locations that produce smartphones, two in China and two in Vietnam and a new facility just opened in India. The two in China (Tianjin and Huizhou) produced ~30% of Samsung’s unit volume last year and there is now speculation of the their potential closing given Samsung’s declining share of the Chinese smartphone market. That speculation has been renewed as worries over the inclusion of smartphones in the next round (should there be one) of US tariffs on Chinese goods continue, and while Samsung had not made any decision on the status of the two Chinese plants, the logic behind the closing seems to make sense.
China is making a concerted effort to reduce its dependency on foreign semiconductors, through a program that was initiated before the US tariff impositions began, with a goal of increasing China’s semiconductor self-sufficiency rate from 13.5% currently to 70% by 2025. The government pledged ~$180b US to make this happen and in 2Q shipments of semiconductor equipment to China were $3.79b, up 44% Q/Q and 51% Y/Y, while South Korea, still the largest consumer of semiconductor equipment, took in equipment valued at $4.86b, down 22% Q/Q and up only 2% Y/Y. China’s semiconductor capex now exceeds Taiwan ($2.98b), Japan ($2.19b) and North America ($1.47b) and is expected to increase by 46.6% next year, totaling $17.3b. With two more years to go with the US administration’s trade policies toward China, what was a long-term program is now a national focus and while Samsung and other semiconductor suppliers are not impacted directly by the US/China trade war, the fallout is worldwide. Whether China can reach its goal by 2025 is uncertain, but the US seems to have added significant fuel to a fire that was already burning.