Samsung Electronics is set to cease the manufacture of mobile phones in one of its plants in China due to high competition from affordable local rivals like Huawei.
The company, which is one of the leading smartphone manufacturers in the world, will stop operations in its Tianjin manufacturing plant due to loss making.
According to data from the research firm Counterpoint, during the financials of the first quarter of 2018, Samsung’s market share has significantly dropped to 1 percent, which is a long way from the 15 percent recorded five years ago.
The South Korean company has admittedly lost to home-grown brands like Huawei, which is fast claiming the lion’s share of the market.
In a statement, Samsung affirmed the move claiming that it is one of the efforts the company is undertaking to enhance efficiency in productions.
“As part of ongoing efforts to enhance efficiency in our production facilities, Samsung Electronics has arrived at the difficult decision to cease operations of Tianjin Samsung Electronics Telecommunication,” Samsung said.
Nevertheless, the company says that the Huizhou manufacturing plant in the southern province of Guangdong, China will remain operational.
The Tianjin plant manufactures 36 million phones annually while the Huizhou plant produces 72 million units. In Vietnam, where the company has a focus on, the company has two factories that cumulatively make 240 million mobile phones a year.
The closing of the manufacturing plant will see about 2,600 employees go home by the end of 2018. However, the company has promised to offer compensation packages to the employees and possible transfers to other Samsung facilities.
“Samsung doesn’t need to stay in China because of rising labor cost and its almost non-existent Chinese market share. They can be better off in India and Vietnam,” said Greg Roh, a senior analyst at Hyundai Motor Securities.
Samsung in a statement also noted that China remains an important market for the brand and is actively participating in China’s economic policies by fostering growth in the components industry.