Samsung Electronics Co is pulling the plug on operations at its last computer manufacturing facility in China, becoming the latest smartphone maker to shift production from the second-largest economy in the globe, the South Korean tech behemoth disclosed on Saturday.
Companies are reconsidering their production and supply networks in the wake of escalating Chinese labor costs, a China-U.S. trade discord, and the negative effects brought by the ongoing global health crisis.
Around 50 percent of the company's 1,700 staff under contract at Samsung Electronics Suzhou Computer will be impacted, excluding personnel assigned in research and development, based on a report by the South China Morning Post on Friday, citing a memorandum to Samsung employees.
Samsung Electronics has decided that its Suzhou Computer facility would no longer put emphasis on assembly and production and instead focus more on research and development as a result of fierce market competition.
A notice sent to the company staff revealed that with the exception of personnel at the research and development division, all others' job contracts will be affected by the operation's closure. The decision was carried out in an effort to improve efficiency across the company's global production hubs.
Based on reports, the local labor department supports the South Korean firm's decision and will help affected workers in finding new jobs. The move will hopefully pan out, analysts said, as they have noticed what can transpire in the midst of Samsung closing down a major production plant.
During Samsung's peak in 2012, the facility had 6,500 workers, though the latest development is only expected to impact about half of the 1,700 staff who were on contract as of the end of 2019.
The Suzhou factory was established in 2002, the year after China joined the World Trade Organization, with international orders eventually hitting $4.3 billion in 2012. But after having been relegated outside the 20 leading exporters list of China that year, the facility fell to 155th spot when the list was made public in 2019, with orders from the previous year plunging to $1 billion.
A Samsung representative declined to comment on the production hub's sales and deliveries or details about worker job status. According to the spokesperson, China remains a crucial market for the company and they will continue to provide quality products and services for Chinese consumers.
Samsung closed down its last smartphone production plant in China in 2019. The tech group's remaining factories include two microchip plants in Xi'an and Suzhou, Reuters reported.