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Not only layoffs, but there have been more reports that the Huizhou factory was closed in September this year. In response to this news, Samsung publicly stated that it has not yet decided whether to close the Samsung Huizhou factory.
The Economic Observer reporter learned from a Huizhou Samsung insider that the layoffs were voluntarily registered, involving indirect departments such as management positions and first-line production positions, and the number of layoffs was about several hundred.
A data list provided by a person close to Samsung to the Economic Observer reporter showed that in the production plan from May to July, the mass production of the Huizhou Samsung plant, the production line of the main finished products in the company, and the manpower required were all reduced. Among them, the MAINLINE finished product line plan is: May 21, June 13 and July 11. As of the end of April, the Huizhou Samsung factory had a manpower of 4,087. The manpower required for the plan from May to July is 3,708, 2,716 and 2,461, with a surplus of 379, 1,370 and 1,626.
In addition, Huizhou Samsung said in the material: "The indirect department is seriously over-compiled, and the productivity is low, and the company's competitiveness is almost gone."
Industry analysts believe that in the past, China’s artificial wages were low and smart.Mobile phoneThe market is big, Samsung has an advantage in setting up a mobile phone factory in China. However, with the pressure on the cost, the intensified competition, and the rise of domestic mobile phones, these advantages have ceased to exist, and the reasons for the existence of the Samsung mobile phone factory in China are getting smaller and smaller.
As of press time, Samsung did not give a clear response to the reasons for the layoffs of the Huizhou factory in the economic observation report and the strategic shift in investment in China.
"This compensation is still very human."
The Huizhou Samsung Factory, located in Chenjiang Town, Huicheng District, Huizhou City, was established in 1992 and officially put into production in 1993. It is Samsung's main production base in China. Since the closure of Samsung's factory in Tianjin last year, the Huizhou Samsung plant has become Samsung's last mobile phone production plant in China.
Unlike other mobile phone manufacturers located in industrial parks, Huizhou Samsung Factory has a mature living area around it, and its life is more intense. At noon on June 12, Samsung employees wearing light-colored work clothes came out from the side door in groups of three and five, and went to rest on the rest bench outside the supermarket.
From the outside of the factory, the Huizhou Samsung factory is no different from the past. Freight logistics vehicles come in and out from time to time. Employees must go through a series of strict security inspection channels. There are more than ten buses marked "SAMSUNG" around the factory. The internal staff told the Economic Observer that this is Samsung's pick-up and return to work. Shuttle bus from Huizhou City.
The only information related to the large-scale layoffs of the factory may be a notice posted on the bulletin board by the Personnel Department on February 28th: the company's recruitment is suspended from March 1, 2019. Please pay attention to this later. Company recruitment notice information, please understand that the inconvenience.
Shen Wenyan, a middle-level employee of Huizhou Samsung, told the Economic Observer that before the official announcement of layoffs, employees already knew the news of the factory's layoffs. However, at the second quarter business briefing held at the end of May this year, the general manager officially informed the staff of the news. "This is not the first layoff of the Huizhou Samsung factory. Since last year, there have been N+1 layoffs, but the first two are layoffs in indirect departments such as management positions. The number of people involved is small, about 20 people. Shen Wenyan said that unlike the previous compensation scheme, Huizhou Samsung’s compensation plan for this layoff is: “N+3+ working age award+employment period salary (career period salary is up to two months salary)”. "This compensation is still very humane. I can get the salary during the period of signing the separation agreement to find a job." Shen Wenyan said that due to the higher compensation, some employees have chosen to voluntarily leave.
In the list of data provided by the people close to Samsung to the Economic Observer, Samsung mentioned that in response to the production plan from May to July and the serious over-compilation of the indirect department and the low competitiveness of the company, the personnel department’s countermeasures include : All departments strictly control overtime, and N+1 humanization efficiency is normalized.
The reason is that the market share has shrunk
Samsung has two mobile phone manufacturing plants in China, and the mobile phone factory in Tianjin was officially closed on the last day of 2018.
For Samsung to successively attack the two major mobile phone factories in North and South, analysts believe that the main reason is that Samsung's mobile phone market share in China has shrunk dramatically, and the cost advantage of mobile phone production in China has declined.
2013 is the heyday of Samsung mobile phone development in China, and naturally it is also the busiest period of Huizhou Samsung factory. "At the time, this was the time when smartphones were selling well, and it was also the most popular time for Samsung in the Chinese market. But Huizhou Samsung is a foreign company, and it has strict regulations on the length of work. In the face of huge orders, there are only expansion plans. At that time, many people were enrolled. "Shen Wenyan said.
According to public data, in 2013, Samsung's mobile phone market share in China was 20%. In just 5 years, the data has dropped to 0.8%. Market research firm IDC data shows that in 2018, Samsung mobile phone sales in the Chinese market was 3.34 million, with a market share of 0.8%. “The market share of Samsung mobile phones in China has dropped from 20% in the most brilliant period to less than 1% now. With the rise of domestic mobile phones, the labor costs are getting higher and higher, and the reasons for the existence of Samsung mobile phone production plants in China have come. The smaller the size.” Sun Yanxi, the president of the First Mobile Phone Research Institute, believes that Samsung mobile phones need China’s market, but there is no need for a Chinese production plant. Therefore, the mobile phone production plant will be relocated to a lower cost place, and more The high-tech sector may be the general trend.
After 2014, Samsung's low-end and mid-range mobile phones were hit by domestic mobile phone brands, and its market share dropped sharply. The 2016 Galaxy Note7 battery explosion caused Samsung to suffer a heavy blow. "After the battery explosion, the order quantity of our factory was significantly less." Shen Wenyan said.
Samsung Electronics' latest financial report data shows that in the first quarter of 2019, Samsung Electronics achieved revenue of 52.39 trillion won, and mobile phones contributed only 25.92 trillion won to Samsung, down 6% year-on-year. Samsung smartphone shipments in the first quarter were 78 million units.
Samsung executives said at the earnings conference that the overall smartphone market is shrinking and competition in the low-end market is intensifying, leading to pressure on Samsung's overall sales. In order to meet the market demand, the production line of Samsung's low-end mobile phone products is undergoing restructuring, and related marketing adjustments also increase spending, so the profitability of the business in the quarter declined.
Domestic ODM factory undertakes
In response to the rise in labor costs in China, Samsung has gradually moved its smartphone production from China to Vietnam and India over the past decade. Industry analysts predict that trade frictions will accelerate this shift.
Public information shows that since 2009, Samsung has built a production base in Vietnam, and the production base was officially put into operation in 2015. At present, Samsung has set up 8 production bases throughout Vietnam, mainly producing mobile phones and electronic components.
In addition, Samsung expanded its largest smartphone factory in the world last year. After the expansion, production at Samsung's new plant is expected to double to nearly 120 million units. In May of this year, Samsung Electronics Group plans to invest 25 billion rupees (about 366.35 million US dollars) in India for smartphone production lines. The investment is expected to land in Noida, India.
Shen Wenyan told the Economic Observer that 40% of Samsung's smartphones have been handed over to domestic ODMs, including Huizhou Hager Technology Co., Ltd.
According to the statistics of the mobile phone industry ODM white paper in 2018, due to the impact of Chinese mobile phone manufacturers, shipments have declined, Samsung, Nokia andLGMobile phone manufacturers have significantly increased their outsourcing ODM projects to optimize costs and R&D resources and enhance the competitiveness of their products. Open projects and ODM companies cooperate. It is expected that Samsung, LG and Nokia will have 40 million outsourcing of ODM projects in 2019.
In Sun Yanxi's view, Samsung's necessity to keep the Chinese factory is small. The advantage of the ODM model is that it can ensure price competitiveness by reducing production costs. The outsourcing ODM project can reduce the cost pressure to a certain extent.