Samsung shifts focus to high-end manufacturing

Samsung Electronics Co Ltd is shifting its focus in China to high-end manufacturing and cutting-edge technology sectors like semiconductors and electric vehicle batteries, while deciding to shut down its television factory in Tianjin.

The company has decided to stop production at its only TV factory in China by the end of November. The decision is part of ongoing efforts to enhance efficiency in its production facilities, the South Korean tech giant said in a statement.

Samsung Display, which makes display panels for various devices, sold off its liquid crystal display or LCD production line in Suzhou, Jiangsu province, to China Star Optoelectronics Technology Co Ltd, a subsidiary of TCL Technology in August. In March, Samsung Display decided to stop production of LCD panels at its plants in South Korea and China by the end of this year, in order to concentrate on its quantum dot light-emitting diode (QLED) screens.

Despite being the world's biggest TV maker, Samsung has faced huge pressure from local players such as Xiaomi, Hisense, TCL and Skyworth. According to market consultancy Beijing Discien Consulting Co Ltd, Samsung's TV sales accounted for just 1.8 percent of the Chinese market during the first six months of this year.

"Samsung is adjusting its business strategy in China due to the sluggish sales in the electronic devices segment amid rising competition from local rivals," said Zhang Jianfeng, deputy secretary-general of China National Household Electric Appliances Commercial Association.

Zhang said that the average profit margins in the TV industry are low, which has affected Samsung's overall performance in the Chinese market.

Meanwhile, the tech giant is shifting its attention and focusing on high-end manufacturing and emerging industries such as semiconductor memory chips, multi-layer ceramic capacitors, organic light-emitting diode displays and electric vehicle batteries in China.

Last year, the company invested an additional $8 billion in the second phase of its chip plant in Xi'an, Shaanxi province, which will make advanced flash memory chips by the second half of 2021. Its production base for electric vehicle batteries started operations in Xi'an in 2015.

Jia Mo, an analyst at market research company Canalys, said Samsung has closed most of its low-end assembly and manufacturing lines in China, and is doubling down on high-precision core electronics components. He said the reason why the South Korean firm has closed its factories in China is to curb rising costs.

"China is still the research and development, and manufacturing center for high-end electronic devices, such as mobile phones, and has obvious advantages in premium raw material production segment. As a result, Samsung will continue to pour more money into the high-end manufacturing segment in China," said Jia.

Statistics from Samsung showed it has invested more than $40 billion in China by the end of 2019 and nearly $30 billion of the investment has been on cutting-edge industries, accounting for 72 percent of the total investment, up from 38 percent in 2012.