Samsung to Move PC Production to China
By Paul Denlinger
Samsung Electronics, the world's largest maker of memory chips, plans to move most production of PCs to its new Suzhou manufacturing plant, which started operations in April. By 2005, it plans to make most of its PCs in the Suzhou factory, which will have an annual capacity of 1 million units.
Samsung said that the move is necessary because of intense pricing competition from Dell and Hewlett-Packard. Seventy-five percent of the company's PCs are sold domestically in the South Korean market, with a remaining 25 percent sold outside.
The PC business accounts for 16 percent of the digital media division's sales, which in turn accounts for about one-fifth of the group's total sales. Approximately 60 percent of Samsung's home appliances and more than two-thirds of its digital media products are already produced outside of South Korea.
In recent years, South Korean companies have suffered from tense relations with their South Korean workers. In some cases, relations have been marred by strikes and other kinds of industrial action.
In China, a worker costs about one-tenth of what a South Korean worker does, and the quality of their productivity is very high. This has accelerated the transfer of plants to China.
A survey conducted by the Korea Federation of Small Businesses showed that 7.2 percent of its 375 member companies have moved their operations abroad, and that another 30.7 percent plan to do so, mostly to China, in the next five years.
Other Korean companies which have moved their operations to China are LG Electronics, which is building a plasma display panel (PDP) module plant in Nanjing, and Hyundai Heavy Industries, the world's largest shipbuilder, which has an excavator plant in China.
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China Business Strategy , a strategic planning consultancy, has helped companies build more than US$3 billion of market capitalization in the China market since 1998.
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