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Feb 24, 2020 / 15:51

Manufacturing plants in Vietnam help Samsung gain momentum against Apple

Samsung stands to be a major beneficiary of the China production problems announced by rival Apple, reaping the rewards of a decade-long bet on low-cost smartphone manufacturing in Vietnam.

Apple’s announcement last week that it was unlikely to meet its revenue forecast for the first quarter due to the Covid-19 epidemic in China could provide an opening for its rival Samsung, where the South Korean manufacturer’s major facilities in Vietnam operate at full capacity.

 A Samsung Electronics plant in Vietnam

As reported by Reuters, manufacturing facilities in China that produce Apple’s IPhone and other electronic gadgets began to reopen last week, but they were ramping up more slowly than expected.

That will mean fewer iPhones available for sale around the world, making Apple one of the largest Western firms to be hurt by the epidemic.

Some of its retail stores in the country remain closed or are operating at reduced hours, which will hurt sales this quarter. China accounted for 15% of Apple’s revenue, or US$13.6 billion, last quarter, and supplied 18% of revenue in the year-ago quarter.

“The magnitude of this impact to miss its revenue guidance midway through February is clearly worse than feared,” Wedbush analyst Daniel Ives wrote in a note.

Meanwhile, Samsung's statistics revealed around 50% of the giant's smartphones and tablets are produced in Vietnam and exported to 128 countries and territories, including the US, Europe, Russia and Southeast Asia.

In 2008 - 2018, Samsung increased its investment in Vietnam from US$670 million to over US$17.3 billion, a 26-fold increase.

Nguyen Tri Thong, corporate marketing director at local smartphone unit Samsung Vina Electronics told Nikkei Samsung Vietnam’s operations are in perfect condition and running at full capacity.

Samsung has also largely ceded the China market to its rivals in recent years, meaning it won’t suffer from the store closures and drop in demand that is hitting Apple and others.

“Samsung is better positioned to weather the virus fallout than its formidable rivals such as Huawei and Apple,” a person with knowledge of Samsung’s supply chain told Reuters.

“The virus exposed China risks. We feel fortunate that we were able to escape the risks,” he said.

Another person familiar with Samsung’s thinking told Reuters: “Samsung does not say it publicly. But it is relieved.”

Still, two sources familiar with Samsung’s Vietnam operations cautioned that should the virus outbreak prolong, Samsung would feel the impact, as the company sources many components from China.

Samsung ended its own smartphone production in China last year as its market share plunged to nearly zero.

During a visit of Minister of Labor, War Invalids and Social Affairs Dao Ngoc Dung to Samsung Electronics Vietnam Thai Nguyen on February 13, General Director of Samsung Vietnam Choi Joo Ho said the company, with 130,000 employees nationwide, has not reported any case of infection so far.

“As the Vietnamese government is stepping up efforts against the outbreak, Samsung is determined to prevent Covid-19 from infiltrating its manufacturing facilities,” Choi stressed.