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Samsung Electronics cuts smartphone production in China

South Korean tech giant will focus on factories in Vietnam and India

Models pose with Samsung Electronics' Galaxy Note 8 smartphones during its launch ceremony in Seoul in September 2017.    © Reuters

SEOUL -- Samsung Electronics is cutting its smartphone production in China to cope with falling sales in the country, showing how the South Korean tech giant is struggling to rebound in the world's largest smartphone market.

Samsung said on Monday that it plans to improve "management efficiency" at its mobile affiliate in Tianjin, in northeast China, indicating that it will lower production at the factory there. However, Samsung said that nothing has been decided yet over whether it would shut down the production line at the affiliate, Tianjin Samsung Telecommunication Co. (TSTC).

"As the smartphone market slows down, the industry in general is in a difficult situation," the company said in a statement. "Therefore, Samsung Electronics' mobile affiliate in Tianjin (TSTC) will focus on improving its competitiveness and management efficiency activities," it said. "But nothing has been decided yet on a withdrawal."

The announcement comes as Samsung's market share in China has fallen sharply over the last few years. It has failed to compete with local brands that have widely expanded their presence in the country. Samsung's market share stood at 1% in the first quarter of this year, down from 3% in the same period a year earlier, while that of Chinese competitor Huawei Technologies increased to 22% from 20% during the same period, according to Counterpoint Technology Market Research.

Samsung said that most of the smartphones produced by TSTC are for the Chinese market. The company runs another smartphone factory in Huizhou, in southern Guangdong Province, which also manufactures mainly for the Chinese market.

Instead, Samsung is strengthening its production lines in Vietnam and India, targeting rising demand in those fast-growing markets as well as making them production bases for exports to the global market. Last month, Samsung added a new production line in India, doubling its yearly capacity to 120 million units. The company also runs its largest smartphone production line in Vietnam, exporting most of those smartphones to Europe and other key markets.

Analysts say that Samsung should do more in China to appeal to tech-focused customers.

"I do think that Samsung needs to pay more attention to China. China is a big market, and I think that a more focused approach to China will help" manage its expectations, said Carolina Milanesi, an analyst at Creative Strategies, a U.S.-based market research firm.

Milanesi said that Samsung's Galaxy Note smartphone with a stylus instrument can appeal to Chinese customers who prefer writing Chinese characters with a pen. The company unveiled its latest Note 9 model in New York last week, with sales starting on Aug. 24.

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