China's consumer electronics related supply-chains appears to be losing its sheen in the post-Covid-19 world. Samsung and arch-rival Apple initiated the shift of shifting their smartphone manufacturing to other locations. The South Korean tech giant is now following it up by moving its only TV making facility out of of Tianjin.
Reports in the South Korean media suggests that Samsung could soon shut down its only manufacturing factory in Tianjin before end-2020. Nikkei Asian Review, said production could shift to Samsung's facilities located in Vietnam, Mexico, Egypt, Hungary and possibly to newer destinations as well.
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However, the electronics giant has clarified that there would be no slowing down of the current production from the Tianjin unit. Nikkei quoted company officials to state that the move was part of a greater trend of businesses shifting supply chains out of China.
Samsung's arch-rival Apple has already stated that it intends to shift smartphone manufacture completely out of China, having already announced that its upcoming flagship iPhone 12 could be made out of India. Apple's manufacturers have visibly enhanced their Indian operations over the past couple of months.
What's driving Samsung's move?
In recent times, Samsung, which has been the world's top seller of flat-screen TVs, lost market share in China due to rising local competition as well as local reactions to South Korea's decision to deploy anti-missile shields despite Beijing's objections. The growing anti-China sentiment further exacerbated Samsung's decision to shift out.
The company started manufacturing television from Tianjin close to 27 years ago. In recent times, the company downsized its operations considerably with just about 300 people working there now. Samsung would be reassigning these workers to other facilities or help them find alternate employment, says the report.
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The Indian option is open
The production from this factory could shift to other geographies with India already on the radar for the electronics giant. In June, the company had indicated that it will be making more than 85% of its TVs sold in India locally. Both Samsung and OnePlus had partnered with Chinese firm Skyworth to make TVs at their Hyderabad facility, operated under a joint venture with an Indian partner.
A report in the Economic Times had also claimed that Samsung had deepened its association with its Indian contract manufacturer Dixon Technologies to expand its range of TVs in India to include 43-to-58 inch models. Till now, Dixon was making only televisions in the 32-43 inches range.
Readers would recall that Samsung had exited TV production in India in 2018 after the federal government imposed additional duties on open cell TV panels that led to Samsung importing finished televisions from Vietnam at zero duties through the free trade agreement route.
In 2019, these additional duties on open cell panels were brought back to zero. Given that open cell panels account for close to 70% of a TV's manufacturing cost, Samsung's shift back to India is understandable in the present context where it's need to exit from China is supplemented by India's open door policy.
India has witnessed large scale action on the TV manufacturing front with some of Samsung's top rivals including LG, Sony, Panasonic, Xiaomi and OnePlus, joining the bandwagon of making in India.
