Samsung Phone Production
>> Samsung Spends $216M in Phone Production
Associated Press
Seoul, South Korea
May 15, 2007
forbes.com
South Korea's Samsung Electronics Co. said Tuesday it will invest 200 billion won ($216.4 million) to boost production of mobile phone handsets in South Korea. The company also said it is considering Vietnam for its next overseas facility.
Samsung, the world's third-largest handset maker, will increase output at its Gumi, South Korea plant to 75 million units this year from 69 million last year, the company said in a statement.
The Gumi plant, Samsung's only domestic handset facility, is about 260 kilometers (161 miles) southeast of Seoul. The investment will be used to transform the facility into a research and development as well as a manufacturing hub.
Separately, Samsung spokesman Anthony Lee said the company is considering several sites, including Vietnam, for its next overseas plant.
Lee's comment came after South Korea's mass-circulation Chosun Ilbo newspaper on Tuesday reported that Samsung will establish a handset manufacturing plant in Vietnam by 2008. Samsung already has handset facilities in China, India and Brazil.
Samsung trails Finland's Nokia Corp. and Motorola Inc. of the United States in mobile phone sales. In addition to phones, Samsung also makes memory chips, liquid crystal displays, and home appliances.
Telecommunications equipment and mobile handsets accounted for 32 percent of Samsung's total sales in the first quarter of this year. ###
>> Samsung Electronics Decides to Go Abroad
Digital Chosun Ilbo
May 16, 2007
english.chosun.com
Samsung Electronics has stopped hiring new workers at its plant in Gumi, North Gyeongsang Province, which has manufactured 65 percent of the 120 million mobile phones it produces each year. The plant has hired between 700 to 800 production workers each year. But from now on, there will be no replenishment of staff, leading to a gradual reduction. Instead, Samsung Electronics will double mobile phone output at its plant in China while building a plant in Vietnam that will begin producing 100 million mobile phones a year starting in 2008.
Samsung says cutting-edge, top-of-the-line mobile phones will continue to be produced at the Gumi plant, while the production of lower-priced mobile phones will move overseas. Competition is heating up in the global market for low-priced mobile phones under US$100. The lower the cost of the phones, the higher the ratio of labor costs, making it crucial to move production bases to countries with lower wages.
But labor costs are not the only problem. Japanese companies that moved their production bases to Southeast Asia during the early 1990s have been returning to Japan since 2000, Honda, Canon, Hitachi, Sanyo and other top players in terms of technology among them. Honda has not built a plant in Japan for 30 years. But now it has announced it will build a plant on the outskirts of Tokyo capable of building 200,000 vehicles a year. Labor costs in Japan are about 10 times higher than in Southeast Asia. Honda’s decision is due to the advanced technologies the Japanese carmaker has. Companies possess core technologies that others cannot imitate or catch up with. So in the absence of competition, the company can set the prices which allow it to make a profit in spite of higher labor costs.
Korean mobile phone makers, including Samsung Electronics, buy 50 percent of their components from others. That’s why they spend $5 billion to $6 billion a year on them. Then there are costly royalty payments to use patented foreign technology. Korean mobile phone makers pay Qualcomm more than $500 million annually to use CDMA technology.
Companies without the core technology or ability to produce key components must strive to lower production costs by moving to markets offering cheaper labor. Not just Samsung Electronics but all Korean manufacturers need to focus on developing the technology to compete on a global scale. ###
- Eric - |
