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|Samsung's mobile phone factory in China (Source: Gettly)|
Discussing the place of Samsung’s new facility, thanhnien.vn cited an expert, who wishes to be unnamed, as saying that Samsung may select India instead of Vietnam to build its next facility due to the country’s huge interest in its high-end Galaxy smartphones and plentiful labour resources. In addition, in July this year, Samsung launched its largest mobile phone factory to date, with the annual output of 120 million devices.
However, according to Nguyen Mai, chairman of the Vietnam Association of Foreign Investment Enterprises (VAFIE), Vietnam also has many advantages over India. “The local research and development (R&D) centre is one of Samsung’s biggest research centres in the world. More than one month ago, at its technology exhibition in Malaysia, a smartphone researched and developed by local researchers received widescale applause. Thus, compared to India, Vietnam may be a better destination for Samsung.”
Narrowing market share as well as rising manufacturing and labour costs are the main reason behind Samsung’s decision to shut its mobile phone facility with the annual manufacturing capacity of 36 million devices.
According to South China Morning Post, five years ago the Korean brand was viewed as a technology and design leader among young Chinese people, but over the past two years no Samsung model has made it among China’s top 10 selling phones.
However, Samsung was No.1 in China with 20 per cent of the market in 2013, but dropped to less than 1 per cent this year as it faced intense competition from Chinese rivals like Huawei, Xiaomi, and even small Chinese brands like OnePlus, particularly when it came to pricing.
Accordingly, in 2015, the revenue of Samsung in China was only half of its previous average annual sales of $13.3 billion due to the fierce competition with Chinese smartphone brand Huawei.
Furthermore, labour costs are on the rises, pushing the firm to look for alternatives to save on operation costs. According to the latest data released by market research portal Statista, the annual wage in China is 74,318 yuan ($10,692), equalling an average of $891 per month, which is nearly five times as much as Vietnamese workers’ average monthly wage of VND4.23 million ($184) (according to the Vietnam General Confederation of Labour).