Samsung shifts from China to Vietnam in order to keep profit margins
Samsung’s new plant has plans on making 120 million units of their handsets until 2015
Samsung has built the world’s largest smartphone business, however recently it appears that the high-end devices are slowing down in terms of sales, so the company is shifting output to Vietnam. This move has been made by the Korean manufacturer in order to secure lower wages and to defend profit margins as the company can no longer tap China’s cheap and abundant workplace.
In all, China’s neighbour will be making over 40% of the smartphones that would generate the majority of the operating point of Samsung and this will happen by the time a new $2billion plant would reach full production in 2015. According to a statement on a Vietnamese government site on November 22, the South Korea based company The Suwon, will begin operations in February next year. With this move, Samsung will join Nokia and Intel that are already producing in Vietnam.
Lee Jung Soon, business leader of the Korea Trade-Investment Promotion Agency in Ho Chi Minh comments that the trend of such companies to shift from China to Vietnam will most likely accelerate for the next couple of years and he believes that the reason lies in the fact that the labour costs higher in China. He also adds that Vietnam is indeed aggressive when it comes to foster industries. In fact, the government has already approved $13.8 billion of foreign projects for 2013 and it strikes a 73% increase after November 20.
Samsung’s new plant has plans on making 120 million units of their handsets until 2015, but the company shares no more details as the matter is private. The whole idea is Samsung to double their current output from the country compared to the 400 million totals that has been shipped last year. According to the analysts, the smartphone business centres on assembling well sourced components and there’s nothing more important than manpower for that matter.
Stay tuned.
Source: Bloomberg
