According to Yonhap News Agency on September 7, 2020,Samsung Electronics’ TV factory in Tianjin, China will be closed at the end of November. This is also Samsung’s only TV factory in China.Samsung Electronics said the move is aimed at improving the efficiency of global production lines. The remarks about Samsung’s “withdrawing from China” are once again rampant.
Original title: Samsung shuts down the only TV factory in China: not to withdraw from China, but to “shake off the burden”
Author: handsome village
This statement is not unfounded: In October 2019, Samsung announced the closure of its last mobile phone factory in China with only 1% of the mobile phone market share left; and in August this year, Samsung announced the closure of its last mobile phone factory in China. Computer factory. After closing the TV factory this time, Samsung has only a home appliance factory in Suzhou, a back-end semiconductor factory and a chip factory in Xi’an in China.
However, after reviewing public information, Times Finance found that Samsung’s investment in China has not decreased in recent years, and the ratio of cutting-edge industries is increasing. Especially in the industrial park invested in Xi’an, the cumulative investment has exceeded 25 billion US dollars, which is the largest overseas investment project in Samsung’s history.
It should be said that whether it is the color TV industry or other electronics industries, Samsung does face serious challenges from Chinese manufacturers. But in this situation, Samsung is also actively seeking change in line with the pace of China’s industrial upgrading.
Perhaps as Samsung once responded: “In the past 27 years since entering China, Samsung has followed the direction of the Chinese government’s industrial guidance and adjusted its industrial layout in time to adapt to the rapid development and changes in the Chinese market.”
The marginalized Samsung TV
Tianjin Samsung TV Factory was established in 1993 and is Samsung’s only TV factory in China. Samsung’s low-end and mid-range TV brands have been produced by contract manufacturers such as Ruixuan Technology, while the high-end QLED TVs sold in China are produced by the Tianjin plant.
Times Finance found that in 2013, Tianjin Samsung Electronics Co., Ltd. (hereinafter referred to as “Tianjin Samsung”) had 3,798 employees. Since then, Tianjin Samsung no longer publicizes the number of employees, but public social security information shows that the number of Tianjin Samsung insured persons in 2016 was only 2,387, and then declined year by year. By 2019, it fell to 613, a sharp drop of three-quarters. According to the Yonhap News Agency on September 7, the total staff of Tianjin Samsung now only has more than 300 people.
Times Finance made numerous public calls to Tianjin Samsung, but none of them were connected. Searching online for Tianjin Samsung’s recruitment information, the results are all Samsung’s foundries, Tianjin Samsung’s own factory’s recruitment information has long expired.
Behind Samsung’s shutdown of the Tianjin plant is its increasingly sluggish market share.
According to data from Aowei Cloud Network, the shipment of Samsung TV in the Chinese market in 2019 was only 1 million units. In addition, according to the data of consulting company Omdia, Samsung Electronics has a 4.8% share of the Chinese TV market in the first half of 2020, ranking only 8th, and the top 7 are all Chinese companies. This is in sharp contrast with Samsung’s nearly one-fifth market share of the global market.
IiMedia Consulting CEO and chief analyst Zhang Yi believes that the shutdown of Samsung’s TV factory will have some impact on upstream manufacturers, but this impact is very limited. “Its output itself is not large, and it is shrinking year by year. Manufacturers’ dependence on the Samsung brand has been weakening.” Zhang Yi told Times Finance.
The shutdown of Samsung’s TV factory may also be an opportunity for some of its partner manufacturers. With the closure of the last self-operated TV factory, Samsung may contract out higher-end TV brands and hand them over to other manufacturers.
Even the discontinued TV factory itself, as well as the production lines and skilled workers in it, have become popular sweets and pastries. According to media reports, many TV foundries are negotiating with Samsung, hoping to buy the factories.
Yi Xianjing, deputy general manager of Dixian Consulting, once revealed to the media that Samsung’s Tianjin factory may be sold to Ruixuan Technology. “The boss of Ruixuan is very enthusiastic about this and has visited Samsung headquarters several times.”
Times Finance called Ruixuan Technology in New Taipei City, Taiwan Province, China. Regarding Ruixuan’s intention to take over the Tianjin factory, a spokesperson for Ruixuan Technology declined to comment.
Domestic manufacturers’ “attack of dimensionality reduction”
“Samsung TV has very good picture quality, but in terms of systems and functions, it is not completely competitive with domestic products,” said Lan Ye (pseudonym), an independent reviewer focusing on smart TVs. In his opinion, Samsung TV is in the forefront of the industry in terms of image quality and other technologies, except for the colder picture color adjustment, which is not as true as Sony’s color.
“But there are very few consumers who understand picture quality.” According to Lan Ye’s observation, “More than 80% of consumers demand low-end devices, the cheaper the better. Only a few people pursue high-end LCD TVs.”
Compared with foreign brands such as Samsung, domestic TVs have more selling points. “Domestic TVs can sell sound effects, sell intelligent voice assistants, sell cameras, and sell beautiful appearances.” Lan Ye analyzed the Times Finance and Economics. “In fact, these have little to do with the TV’s viewing function, but consumers like it very much. This is the way domestic TVs sell TVs.”
In addition to insufficient selling points, system incompatibility is also a flaw in Samsung TVs. “Samsung is similar to LG. The operating system is a self-developed system, not an Android system, which is extremely difficult to use.” In Lan Ye’s view, after Chinese consumers have bought a TV, if they want to install the system themselves, they have to buy another Android. Connect the set-top box. This has also led to Samsung’s dissatisfaction in China.
But Zhang Yi, chief analyst of iiMedia, believes that the fundamental reason for Samsung’s “Waterloo” in China is a different way of thinking.
Zhang Yi noted that the overall price of Samsung TVs is relatively high, especially in the field of smart TVs. For many consumers, the price/performance ratio is not as good as that of local Chinese manufacturers.
He believes that the reason for this price gap is that China’s TV industry has surpassed the previous business model of TV itself. In the past, regardless of China or the global market, a TV was a TV. But today, the TV can also be a living room culture, or a drainage tool.
According to Zhang Yi’s analysis, “Chinese manufacturers’ play in the smart TV market is not a problem even if it is not profitable or even a slight loss. As long as the living room can be firmly occupied, it will be basically solid in the next five to ten years. Soft ways, such as membership fees, paid content, etc. to make money, rather than the TV itself.”
This is more like the sales model of smart phones in China today. When Lei Jun said that Xiaomi is an “Internet company”, what he wanted to say is: Xiaomi no longer needs to sell hardware to make a living, but can make money by selling Internet services.
“The wool comes out of the pig.” China’s smart TV industry is actually already a part of the Internet economy.
TrendForce analyst Hu Jiarong also agrees with this view. He analyzed to Times Finance that, compared with the upgrading of hardware equipment of foreign brands, domestic manufacturers are using the Internet to change consumers’ habits of using TV, and to develop TV into a social platform.
Hu Jiarong told Times Finance, “After the completion of the domestic 5G network, the development of smart TVs will accelerate. Some manufacturers that have both mobile phones and TV products can break through the device barriers of different products to achieve seamless data streaming. .”
Zhang Yi believes that with this special business model and market positioning, not only Samsung, but also other foreign manufacturers will be fatal. “From this point of view, it also shows that in the field of intelligent electronic products, China has already taken the lead in the global business operation model, and established manufacturers have fallen behind.”
In his view, not only Samsung, but also foreign brands such as Sony and Panasonic need to make huge changes if they want to gain a foothold in the Chinese market. The key to change lies in the construction of the entire industrial chain. “Especially the content distribution industry chain, currently foreign manufacturers basically do not have it. If it does not have the entire ecological construction, then it may lower the price of TV sets very low.”
But for foreign manufacturers, there is a serious obstacle to restructuring the industrial chain. Most overseas manufacturers will adopt unified global standards in the global market. This set of standards may be effective in other regions, but it is difficult to adapt flexibly when encountering China’s special business model.
Zhang Yi predicted that the current gameplay in the Chinese market will rapidly spread in the global market in the next few years. “Once the domestic market is relatively saturated, smart hardware manufacturers such as Xiaomi, as well as several other traditional Chinese manufacturers, will definitely move to the global market. At that time, it will be difficult for other manufacturers to compete.”
Did not leave, just exited the low-end market
Samsung’s withdrawal from China in the low-end field is not only the lack of competitiveness, but also the result of Samsung’s initiative. “Currently in China’s TV field, foreign brands focus on the high-end market. On the one hand, foreign companies still have advantages in brand influence; on the other hand, foreign companies also avoid operating losses caused by price wars in the low-end market.” Jie Meijuan, research director of the cloud network consumer electronics division, analyzed to Times Finance.
Jie Meijuan believes that foreign brands such as Samsung are currently facing double pressure. On the one hand, it is the rising labor costs in China, on the other hand, it is the price war of local Chinese manufacturers. In this environment, even if it is still profitable, all it makes is “hard money.”
According to data from Aowei Cloud Network, in the first half of 2020, the market retail volume of China’s color TV industry was 20.89 million units, a year-on-year decrease of 9.1%. The market continues to be sluggish, and the color TV industry is also reappearing “price war”. In the first half of 2020, the average price of major brands fell sharply, with the lowest year-on-year drop of nearly 30%, and the average price of foreign brands also fell 5.1% year-on-year.
For Samsung, instead of fighting with local brands in the low-end field, it is better to use its own brand and technological advantages to maintain a high-end market and achieve higher profit margins. This is not only an aspect of China’s local industrial upgrading, but also reflects the trend of Korean enterprises to grab more profits from the high-end market.
Under the guidance of the idea of ”advancing towards high-end”, Samsung began to “shake off the burden” step by step.
In July 2018, Samsung announced the expansion of its factory in New Delhi, India, into the world’s largest smartphone factory.
And Vietnam has replaced China as Samsung’s largest mobile phone production base. According to Reuters, more than half of Samsung’s mobile phones worldwide are currently produced in Vietnam.
In the field of panel production, Samsung and other Korean companies have also begun to get rid of low-end production capacity. In March 2020, a Samsung spokesperson publicly stated that it will completely terminate its LCD panel production in South Korea and China by the end of this year. In August, Samsung sold a 60% stake in Suzhou Samsung Electronics Liquid Crystal Display Technology Co., Ltd. and a 100% stake in Suzhou Samsung Display Co., Ltd. to TCL for a price of 1.08 billion US dollars (about 7.6 billion yuan).
Samsung abandoned LCD to bet on a new generation of panel technology. And Samsung’s existing technological advantages in the color TV industry are themselves a product of success. In the first decade of the 21st century, there was a fierce competition in the color TV industry. The competition is a plasma TV led by Panasonic, and the other is a liquid crystal (LCD) TV led by Samsung and Sharp. Finally, in 2013, Panasonic announced the discontinuation of plasma TVs, LCD won the final victory, and Samsung has been leading the development of LCD technology to this day.
In a blink of an eye, a new round of competition has appeared in the panel industry. LG has vigorously developed OLED panels, leading a new round of technological development. Lan Ye told Times Finance, “A lot of brands are currently making OLED TVs, and the panel suppliers are all LG.”
Samsung has taken a different approach, betting on QLED panels. Lan Ye believes that, compared to QLED, LG’s current OLED technology is more advanced.
In the end, it is still unknown who will die. But no matter who wins, it will still be Korean companies that dominate the next-generation panel technology.
In addition to the “industrial upgrading” of the TV industry, Samsung has increased its high-tech industry layout in China in recent years.
China Samsung President Huang Degui revealed a set of data to Xinhua News Agency in 2019: From 2013 to 2018, Samsung invested USD 22.8 billion in China, of which the proportion of investment in cutting-edge industries increased from 13% to 55%, and 26 companies were established. There are 157 institutions including manufacturing enterprises and 7 R&D centers, covering multiple fields such as electronics, finance, heavy industry, and service industries. The industrial layout has realized the transformation from labor-intensive to capital and technology-intensive.
Samsung’s investment in China’s high-tech fields is the most eye-catching in Xi’an. According to a report from Xi’an Daily in 2019, Samsung Electronics has built high-end memory chips, packaging and testing projects, and electronic R&D centers since it settled in Xi’an in 2012, involving finance, trade, power batteries, construction engineering and other fields, with a cumulative investment of US$25 billion. , Is the largest overseas investment project in Samsung’s history.
Zhang Yi also believes that although Samsung has shrunk in the to C market in recent years, it still maintains the technological advantage of the entire supply chain. “Regardless of chips, panels or other components, Samsung is still ahead.”