Samsung cuts smartphone production in China, competition bites

The logo of Samsung Electronics is seen at its office building in Seoul, South Korea, Jan. 7, 2019. REUTERS/Kim Hong-Ji/Files

SEOUL/SHANGHAI (Reuters) – South Korea’s Samsung Electronics Co Ltd said on Wednesday it plans to cut production at a smartphone plant in China, as competition from domestic rivals squeezes its share of the world’s biggest smartphone market to less than a paltry 1%.

The output reduction at the factory in the southern city of Huizhou comes just six months after Samsung said it would close its only other handset plant in China, in the northeastern city of Tianjin, in a move it said would enhance efficiency.

Samsung, the world’s biggest smartphone maker, has seen its share of China’s market shrink from about 20% in 2013, showed data from Strategy Analytics. The intervening years have seen a bout of anti-South Korean sentiment following a diplomatic spat, as well as a shift to local champions like Huawei Technologies Co Ltd at a time of deteriorating Sino-U.S. relations.

In the three months of 2019, however, Samsung’s smartphone sales volume in China rose 40% versus the previous three months, helped strong promotion of premium models and cheaper mass-market handsets, showed an April report from Counterpoint Research.

Samsung’s Wednesday statement followed a report by financial magazine Caixin saying the South Korean firm had offered voluntary redundancy for some employees at the Huizhou plant.

Samsung declined to detail the plant’s capacity, staff numbers or degree of production cut when contacted by Reuters.

A spokesman in China told Reuters there would be “some adjustment to production volume and staff” based on the market situation. He declined to provide details.

The smartphone maker’s share price was 1.0% higher in afternoon trade in Seoul. The KOSPI benchmark share price index was down 1.0%.

(Reporting by Heekyong Yang and Brenda Goh; Additional reporting by the Shanghai Newsroom; Editing by Darren Schuettler and Christopher Cushing)

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