Samsung slowly shifted its manufacturing operations to Vietnam from China. In the face of the Coronavirus calamity, the shift becomes one of it’s more prudent moves in recent times.
The chaos and crisis stemming from Coronavirus epidemic has hit the world’s biggest phone makers including Apple, Huawei and Xiaomi, but not Samsung. Apple announced it would fall short of its revenue targets for the current quarter as the virus outbreak hit its sales as well as production through Foxconn in China. Likewise, Xiaomi also expects its sales in the March quarter to be significantly down.
Heads Up! Coronavirus is helping Samsung in the Smartphone race against Apple, Huawei and Xiaomi
- With major manufacturing happening in China, Apple, Xiaomi and Huawei will take a hit in their quarter targets
- Samsung shifted operations to Vietnam in 2019, and in the unlikely scenario remains unimpacted as of now
- However, if the outbreak continues, Samsung will be eventually hit. Here’s how…
The third big rival for Samsung, Huawei hasn’t made any similar announcement as yet. However, analysts and its suppliers in the market expect Huawei to also suffer a setback due to its dependence on China as its manufacturing base. Factories in China have been idle for a number of weeks and many that have restarted production have only seen minimal operations owing to lack of consumers and manpower available.
Why Samsung remains unaffected by the Coronavirus effect?
Almost a decade ago, Samsung decided to shift manufacturing to Vietnam to leverage the country’s lower costs. The move seems to be finally paying off in an unlikely way. The South Korean electronics giant gets more than 50 per cent of its smartphones manufactured in Vietnam. This has now helped Samsung evade the crippling effect of Coronavirus faced by Apple, Huawei and Xiaomi in China.
In 2009, Samsung decided to shift manufacturing to Vietnam to leverage the country’s lower costs. The move is paying off in an unlikely way.
Furthermore, Samsung’s advantage stems not only from the manufacturing standpoint but also go-to-market in China. The smartphone maker, albeit reluctantly, let slip its major share of the Chinese market to the other three. So, the closed markets in idle Chinese cities is unlikely to hit Samsung’s quarter targets.
When and how can the Coronavirus Crisis also hit Samsung?
In 2019, Samsung completely wrapped up its China operations after its share of the market went down to a minimum. It ventured into Vietnam in 2009 and relies on cheap manpower and government-backed incentivization to amplify its production. However, a number of smaller parts used for its phones are still made in China. If the Coronavirus outbreak continues to expand, this is the gap where Samsung may get hit just like Huawei, Apple and Xiaomi.
When the outbreak started, Vietnam put stringent border control protocol on the ground to ensure it stays away from a major impact. While much of that has been resolved now, a number of Samsung’s small-time OEM manufacturers have still not been able to resume their production. While the virus has till now helped Samsung reduce the gap with its biggest rivals, the future could loop it into the downward spiral too.