Following Samsung, many Korean companies withdrew factories from China
After Samsung fired its first shot, a series of Korean companies were trying to switch production lines from “world factories”. After the news that Samsung is about to close its last factory in Huizhou, China, many other Korean companies are also preparing to withdraw from China. Hyundai Motor, Kia Motors and LG Electronics are all considering a retreat. According to Nikkei, this is an action to avoid dependence on China. Korean companies identify factors such as competition from domestic companies, geopolitical tensions and China’s economic policy that may put every company at risk. “It seems that they are only trying to keep up to this point in order to avoid being made difficult by the Chinese government, but now they can’t stand it anymore,” said a source in the financial industry in Japan, often working with Korean companies. Quoc told Nikkei. Follow Samsung to leave China Samsung is the leading company in this trend. When the smartphone market share in China dropped to too low, less than 1% in 2018, many people predicted that Samsung will soon close its factory in Huizhou. It used to provide a fifth of all phones sold in China in 2011. The Korean company has been trying hard to maintain production, because closing this factory will make it difficult for Samsung to meet the employment targets set by the city government. However, Samsung has not been able to maintain more, and has stopped producing smartphones at this factory since late 2018. Many workers are offered early retirement. “When Samsung was at the forefront, our psychological barrier was low,” said the employee, who works for another Korean company. Hyundai Motor announced a suspension of production at the plant near Beijing, with a capacity of 300,000 vehicles per year in May. Kia also said it would stop producing Kia brand cars at its factory in Jiangsu province in June. Meanwhile, LG Electronics said it has shipped all exported air-conditioner production lines to the US market from its factory in Zhejiang province to Korea. “Many companies have been very optimistic about China just three or four years ago. Now more than half of Korean companies are considering withdrawing from here, both in terms of business and production,” said Peter Kim, home. Strategic analysis at Mirae Asset Daewoo on the Financial Times. Negative waves continue to come This is not the first time Korean companies have to consider the risks in the Chinese market. However, all concerns are ignored when they are still doing well in this country. In 2012, Samsung is still the leading smartphone brand in China. By 2016, Hyundai still ranked third in the car market share in this country, behind only Volkswagen and General Motors. However, in the past few years, domestic brands have started to counterattack. The strong areas of Korea such as semiconductors or cars have the appearance of worthy Chinese competitors. Samsung slipped out of the top 10 smartphone brands, while Hyundai was categorized as a “second-class” car with a sixth or seventh position in market share. In 2017, the decision to deploy the US missile defense system in South Korea was opposed by the Chinese side. This led to a movement to boycott Korean brands, causing Lotte to withdraw all supermarkets from China. Other brands continue to face difficulties for more than a year, and they have not yet made good business again, the US-China trade war takes place. Export to China, South Korea’s largest market, dropped by 20% in the past year, according to data released in May. The US government plans to increase import duties on many goods from China also makes many Korean companies have factories in China worried. The decision to put Huawei on the US blacklist makes things worse. If Huawei is pushed into the bottom line, their large orders with Korean chip suppliers will be canceled, causing supply to outstrip market demand. This will lead to a sharp drop in component prices, affecting Korea’s important business. China is Korea’s most important market. Excluding Huawei’s case, the decrease in semiconductor components caused semiconductor exports to China to drop by 31% in the past year. When Huawei no longer purchases, things will be really bad for the Korean semiconductor industry. In addition, China is not happy when Korea’s two largest carriers, SK Telecom and KT Corp, do not use Huawei components when deploying 5G networks in the country. Samsung, LG, Hyundai or Kia may want to quickly forget the experience in China to focus on new markets and production environments, just like Lotte did last year. “I am light-hearted when I have now forgotten about the sad memories of China, and focused on new markets,” said Lee Hak-jae, Vice President of Lotte Mart’s foreign business development division. on the Financial Times. “We have had many in-depth discussions to find an alternative market for China. The lesson from China is that growth is not synonymous with long-term sustainable success,” Lee said.