Samsung Electronics’ sales in China for the first half of this year have declined by more than 12 trillion won compared to the same period last year. There are visible signs of Samsung’s movement away from China, with both the number of their operational facilities and employees in the country on the decline.
According to the semi-annual report of Samsung Electronics released on Aug. 17, the company’s sales in China for the first half of this year totaled 17.808 trillion won. This is a sharp drop of 12.654 trillion won (41.5%) when compared to the 30.462 trillion won sales in the first half of the previous year. The last time Samsung’s first-half sales in China dipped to the 17 trillion won range was four years ago in 2019, when it was 17.814 trillion won. The proportion of Samsung’s total sales from China has decreased by 4.7 percentage points, going from 26.4% a year ago to the current 21.7%.
Out of Samsung Electronics’ total sales of 81.8978 trillion won in the first half of this year, which includes both domestic sales and exports, 17.808 trillion won, or 21.7%, came from China. The proportion of sales from China was 29.9% at the end of 2021, but has been continually decreasing, reaching 26.4% in the first half of the last year and 25.8% by the end of that year.
During this period of China’s declining share, the Americas have surpassed China. While China and the U.S. have been Samsung Electronics’ two major sources of sales, in 2021, China had a slightly larger share of 29.9% compared to the Americas’ 29.2%. However, by the end of last year, the Americas (31.1%) surpassed China (25.8%).
The performance of Samsung Electronics’ semiconductor production and sales subsidiary in China has also been halved. The sales for the Shanghai Samsung Semiconductor (SSS), which deals with semiconductors and displays, for the first half of this year stands at 6.59 trillion won, a 49.5% decrease from the 13.55 trillion won in the first half of the previous year. Their net profit during the same period also decreased by 16.6%, from 1.38 trillion won to 1.15 trillion won.
Analysts suggest that lingering anti-Korean sentiments since the THAAD issue, along with the modest effects of China’s economic reopening, are causing a slow recovery in local sales. Uncertainties arising from the U.S.-China power struggle remain.
Both the number of Samsung’s operations and employees in China are on the decline. According to Samsung’s Sustainability Report, the total number of non-executive employees in China has steadily decreased from 599 in 2020 to 527 in 2021 and to 477 last year.
Conversely, the number of employees in Southeast Asia, Southwest Asia, and Japan is on the rise: from 3,590 in 2020 to 4,305 in 2021 and to 4,583 last year.
Samsung is also reducing its number of operations in China. According to the Korea CXO Institute, Samsung has reduced its affiliated companies in China from 87 in 2018 to 65 this year, a decrease of 22 in five years.
An industry insider commented, “Beyond the U.S.-China conflict, factors like rising labor costs in China and political risks are diminishing China’s appeal as the ‘world’s factory.’” They added that “it would be difficult for companies to decide on a full departure from China, hence the considerable deliberation.”
Given the current climate, Samsung Electronics had launched a China Business Innovation Team at the end of 2021 under the leadership of Vice Chairman Lee. However, its effects seem limited. Organized to oversee products, brands, distribution networks, personnel, and investments for the Chinese market, it has yet to find a solution to the challenges faced by the business in China. Particularly, the semiconductor business is struggling, coinciding with a market downturn. The smartphone market share remains in the 0-1% range and, with the drastic decline of sales in China, the sense of crisis concerning local operations has intensified.