Samsung Electronics
Samsung Electronics is thinking of shutting down one of its plants in China. Reuters/Kim Hong-Ji

Samsung Electronics could possibly shut down one of its smartphone-manufacturing facilities in China due to lukewarm sales in the country. The company is also considering soaring labor costs as another main reason for this move.

Industry sources revealed Monday that Samsung is now mulling over the idea of closing a China-based plant within the year. Samsung has two plants in the gigantic market, but the one that could end its operations soon is Tianjin Samsung Telecommunication (TSTC) in Tianjin, which is located in northern China.

“Samsung says there will be no more orders from Tianjin. That means [it is] suspending production there,” one source told South Korean news outlet Etnews on condition of anonymity. The source added that Samsung has already informed key suppliers and major partners of the possible move.

Should Samsung decide on shutting down its two facilities in China moving forward, its global smartphone production system could be restructured. It could also relocate its production facilities, just so it could continue producing ample smartphones to meet its yearly targets.

The idea of shutting down the Tianjin plant is something that’s not at all surprising. The facility used to have a vital role in Samsung’s global production hub. However, its role has been significantly reduced in recent years when Samsung turned its focus to other markets like India and Vietnam, as pointed out by The Investor.

In addition, Samsung has also been losing its grip in the Chinese market. In fact, the plant’s sales lowered from 11.41 trillion won in 2014 to 6.93 trillion won the year after. The slowing sales of Samsung in China is attributed to its fierce competition from its Chinese rivals who are releasing more affordable handsets that still come with high-end features.

A Samsung executive did not deny the possibility of the shutdown when asked for comment on the circulating story. “We have reduced production at the Tianjin plant and will continue to do so in the future. But we have not yet decided on its shutdown,” the executive said.