Samsung Plans To Close Tianjin TV Factory To Speed Up Industrial Upgrading In China

Since the beginning of this year, Samsung's industry chain has been discussed in China. Samsung plans to close its Tianjin TV plant after closing its last PC plant in China and selling LCD and module production lines in Suzhou.

According to reports, the factory is Samsung's only TV factory in China. It was founded in 1993 and now has three TV assembly lines with more than 300 employees. The closure of Tianjin TV factory is to improve the efficiency of supply chain management.

Several TV industry chain insiders told the 21st century economic report that Samsung has the intention to sell the Tianjin factory, which may be a OEM. At present, the buyer has not been determined, so it will not close the production line immediately. However, some people close to Samsung told the 21st century economic reporter that the news about the negotiations between Samsung and the TV OEM is not true.

In any case, even if Samsung wants to sell the TV factory in Tianjin, it will not be easy. The TV market has already had overcapacity, and the ceiling can be seen. If it only acquires the factory and fails to make profits, it will be a greater risk.

With the rise of China's intelligent hardware manufacturers and the improvement of LCD production capacity, these manufacturing industries have gradually shifted to the Chinese market. The competitiveness of Korean enterprises in the Chinese market has declined and their profits are not good. The epidemic situation has accelerated Samsung's determination to "exit" to a certain extent. In the view of those close to Samsung, these are part of Samsung's industrial upgrading in China.

Behind the closure: less than 2% of China's market share

First of all, take a look at the market share of Samsung TV. According to Beijing Dixian information consulting data, in the global TV market in the first half of 2020, Samsung ranked first with 18% market share, followed by LG accounting for 10.7%, TCL ranked third with 9.5%, Hisense accounting for 8.2% and Xiaomi ranking fifth accounting for 5.4%.

It is not difficult to find that Samsung and LG have taken nearly 30% of the global TV market, but looking at the Chinese market, the situation is quite opposite. In the list of domestic TV brands in the first half of the year, Xiaomi, which accounted for 21.2%, ranked first, followed by Hisense (14.4%), TCL (13.5%), Skyworth (12%) and Changhong (6.6%). Samsung ranked tenth with a market share of only 1.8%.

Since 2018, the share of Samsung TV in the Chinese market has been less than 2%, which can not help but remind people of the situation of Samsung mobile phones in the global and Chinese market.

Yi Xianjing, deputy general manager of Beijing Dixian Information Consulting Co., Ltd., told 21st century economic reporter that "before, Samsung's factory was mainly for the Chinese market, but in the domestic market, due to the competitive strategy of Xiaomi and traditional local brands seizing market share at a low price, Samsung's operation is under greater pressure."

He also told reporters: "the factory may be sold to Ruixuan. Ruixuan's Vietnam factory itself has OEM work for Samsung. After selling, the shipment in China will be handed over to the OEM. Ruixuan's boss has visited Samsung's headquarters several times. If Samsung sells its Chinese factory, the factory capacity in Asia will be concentrated in Vietnam. "

On the other hand, in terms of production capacity, how much does Tianjin factory affect Samsung?

"The production capacity of Tianjin factory is 3M (million units), and the impact on Samsung will not be great after it is closed, The production capacity of Samsung's color TV factory is 53.6m. Even if 3M is cut off, there will be no shortage of production capacity, "Yi Xianjing told reporters." what's more, Samsung is also increasing the proportion of small and medium-sized orders to be outsourced. This year, it will be 3.5m to build 45.6m by itself. Even if Tianjin factory is closed, the capacity will be enough. So closing the factory can be understood as a measure to improve profits. "

Industrial chain adjustment: turning to high end

Although the closure of Tianjin TV plant has little impact on Samsung, the "noise" of Samsung's industrial chain in China has been continuous. Although Samsung has reduced some of its factories in China, it is obvious that Samsung's "retreat" from China is for gimmicks. Samsung's investment in China is still increasing. According to the data released by Samsung's official microblog, the total investment of Samsung in China has exceeded 40 billion US dollars in 28 years, and the investment in advanced industries is nearly 30 billion US dollars, accounting for 72% of the total investment.

However, there are structural changes in the industrial chain built by Samsung in China, which are related to the global industrial trend, and also related to the overall industrial strategy and performance fluctuation of Samsung.

First of all, from Samsung's financial report, in the first quarter of 2020, seasonal weakness and epidemic situation have affected its performance. Among them, compared with 2019, the profit of Samsung TV business decreased due to the pricing pressure brought by intensified competition; in the second quarter, the profit of Samsung's home appliance department increased, thanks to the sales growth of air conditioners, clothes dryers and other home appliances, as well as high-end TVs including qled models.

It can be seen that for the TV category, its profit growth lies in the high-end market, while in the price war market in China, Samsung TV is impacted by various echelons of Chinese brands.

In the first half of this year, Samsung's large panel business continued to lose money, but slightly narrowed. The large-size panel is mainly used in TV products, with LCD in the majority, which has become the loss burden of Samsung. In combination, Samsung's performance in the Chinese market is poor at both the demand terminal and the supply panel side. Closing the TV plant, selling the LCD plant and becoming a shareholder of TCL CStar is a lighter solution.

Secondly, from the perspective of Samsung's industrial structure, the semiconductor industry has always been its profit pillar and technology cornerstone. Since the founding of Samsung, South Korea has been supporting Samsung's development vigorously, helping it enter the world's first echelon of memory chips and CMOS image sensors. Samsung Semiconductor's performance was poor last year, and it continued to expand to the upstream of the industrial chain, hoping to have more revenue sources in the semiconductor business and continue to hold the voice in the high-end market.

Last year, for example, Samsung Electronics announced that it would invest 133 trillion won (about US $115.8 billion) in its logic chip business, including OEM services, by 2030. The logic chip is TSMC's strong point. Samsung hopes to surpass TSMC and become the world's largest chip manufacturer. For another example, Samsung plans to invest 13.1 trillion won (about 11 billion US dollars) in facilities and research in five years for the large-scale qd-oled production line plan, which is also closely related to the high-end TV market.

Finally, from the perspective of the global market of home appliance industry, in the regional changes, China has undoubtedly become a big capacity country, and the brand is also rising. After Japan's strategic withdrawal from the home appliance industry, Samsung and LG continued to consolidate their core position in the middle and upper reaches of the semiconductor industry. However, Samsung is still in the world's first echelon in the mobile phone and TV industry, but it is losing in the competition in the Chinese market. Samsung also adopts the method of adding and subtracting the industrial chain. This is not only one aspect of the upgrading of Chinese brands and manufacturing industry, but also reflects the trend of Korean enterprises to grab more profits from upstream and high-end markets.

?