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By 2015, Samsung will no longer have a manufacturing plant in China. Instead, according to Bloomberg, the company is relocating to Vietnam “to secure even lower wages and defend profit margins as growth in sales of high-end handsets slows.” As many of us know, large companies like Samsung manufacturer in countries where wages are low to maintain high margins. The plant, which cost $2 billion to build, will open in February and reach full production in 2015. This new plant will account for 40% of the smartphones in Samsung’s operating profit. China’s higher wages are driving companies away and Vietnam is becoming more cost-effective.
Upon reaching full production, it is believed that the Vietnam plant will be able to generate 120 million handsets every year. To do this, Samsung is tapping into Vietnam’s young work force that is very well-educated and stable. Lee Jung Soon of the Korean Trade-Investment Promotion Agency told Bloomberg that “’the handset business is all about assembling well-sourced components’” and Vietnam’s manpower can handle the task. Another plus for the move is that Samsung is much closer to Vietnam in terms of its supply chain.
Source: Bloomberg
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