Samsung makes more investments in China
Samsung Electronics Co Ltd is making a strategic adjustment in China and beefing up investment in 5G related technologies and equipment, as the South Korean technology giant is reportedly planning to close a high density interconnect (HDI) production unit in Kunshan, Jiangsu province, and invest an additional $8 billion into its memory chip plant in Xi'an, Shaanxi province.
Samsung ElectroMechanics Co, an electronic components maker affiliated with Samsung Electronics, said it will shut down one of its Chinese units that produces HDI, a type of printed circuit board used in electronic devices including smartphones and laptops, due to low profitability, a report by Yonhap news agency said.
Samsung ElectroMechanics said Kunshan Samsung Electro-Mechanics Co in Jiangsu will halt production and sales, adding it plans to sell assets of the Chinese unit, the report noted.
Samsung Electronics did not respond to requests for comment on the closure of the HDI production unit.
The South Korean tech heavyweight will invest an additional $8 billion into its memory chip plant in Xi'an, Shaanxi province, Xi'an Daily reported.
The company has invested $7 billion in the second phase of its chip plant in Xi'an, which will primarily produce advanced flash memory chips and is expected to begin mass production in the first quarter of 2020.
The first phase of Samsung's plant in the Xi'an Hi-Tech Industries Development Zone went into operation in May 2014, with a total investment of $10 billion.
Despite being the world's biggest smartphone maker, Samsung's sales are close to negligible in China. Statistics from market consultancy Strategy Analytics showed that in the second quarter of this year, Samsung's sales accounted for 0.7 percent of the Chinese market. The company had a market share of about 20 percent in China around 2013.
Hwang Deuk-Kyu, president of Samsung China, said during the second China International Import Expo that the company always attaches great importance to investment, cooperation and exchanges in China, especially in the 5G era.
"The reason for Samsung closing its HDI manufacturing factory lies in its poor business performance in the Chinese market amid mounting competition from local rivals," said James Yan, research director at Counterpoint Technology Market Research. Yan added the company also entrusted its smartphones to Chinese factories for production, using the original design manufacturer or ODM form to save costs.
"The flash memory chip market is expected to pick up next year, along with the rising demand, so it is reasonable that Samsung steps up its production of such chips," said Huang Yangqi, an analyst at the research institute of integrated circuits under CCID Consulting, a leading Chinese think tank.
Huang added the expanded production capacities will help shore up Samsung's market share and leading position in the NAND flash memory chips sector, while noting the Xi'an plant will further drive the development of the downstream storage industry in the domestic market.