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Why Samsung and Sony are closing shop in China

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The biggest smartphone maker in the world has closed its production plant in the biggest smartphone market in the world. South Korean super brand Samsung has closed its phone manufacturing in China blaming it all on too much competition from local producers.

The decision was long coming since the Galaxy brand maker had already stopped production in another factory last year. The closure of the plant in Huizhou, in the south of China comes after the phone maker had already hugely reduced its production rate in June 2019.

Reuters reported that economic slowdown and rising labour costs were major factors in Samsung’s decision. Many electronic companies preferred China for production because it had necessary labour that could be afforded at lower costs compared to other countries. Combined with the large mass market, it was definitely the place to be if you had to succeed in terms of revenue.

However, Chinese innovation has seen many phone factories and brands come and go sometimes within months. These local brands usually come up with devices that offer almost the same experiences as the world super brands yet at a cheaper price. Huawei has made big strides trying to dislodge Samsung as the world leader in smartphone technology and production, despite massive functions by the US. Xiaomi is another major player offering high end devices at cheaper prices.

The local competition cut Samsung’s market share from 15 percent to just 1 percent between 2013 – 2019. It shut down its Tianjin plant in 2018. Sony meanwhile is moving its production to Thailand. Samsung hasn’t yet indicated whether it will increase its production capacity in its plants in India and Vietnam. It had produced 63 million devices at the Huizhou plant in 2017 out of its global production of 394 million. The company will however continue selling in China.

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