Exclusive: Samsung workers in Vietnam bear the brunt of slowing global electronics demand

Employees walk to the Samsung factory in Thai Nguyen province, north of Hanoi, Vietnam October 13, 2016. REUTERS/Kham

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THAI NGUYEN, Vietnam, Aug 4 (Reuters) – Samsung Electronics Co Ltd has cut production at its massive smartphone factory in Vietnam, employees say, as retailers and warehouses grapple with increased inventory amid a global decline in consumer spending.

America’s largest warehouse market is sold out and major US retailers such as Best Buy (BBY.N) and Target Corp (TGT.N) are warning of slowing sales as shoppers tighten their belts after the spending crises of the early COVID era. Read more

The effect is keenly felt in Vietnam’s northern province, Thai Nguyen, one of Samsung’s two mobile phone manufacturing bases (005930.KS) in the country where the world’s largest smartphone vendor produces half of its production of telephones, according to the Vietnamese government.

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U.S. business inventories climb on restocking and slowing consumer spending

Samsung, which shipped about 270 million smartphones in 2021, says the campus has the capacity to manufacture about 100 million devices a year, according to its website.

“We will only work three days a week, some lines are adapting to a four-day work week instead of the previous six, and of course no overtime is needed,” said Pham Thi Thuong, a worker from 28 years at the factory. told Reuters.

“Business operations were even more robust at this time last year when the COVID-19 outbreak was at its peak. It’s so lukewarm now.”

Reuters could not immediately determine whether Samsung was shifting production to other manufacturing bases to compensate for reduced production at the Vietnamese factory. The company also manufactures phones in South Korea and India.

Samsung told Reuters it had not considered cutting its annual production target in Vietnam.

The South Korean tech giant is relatively optimistic about second-half smartphone demand, saying on its earnings call last week that supply disruptions had mostly been resolved and demand would remain steady. or even would see single-digit growth. Read more

It aims for foldable phone sales to overtake those of its former flagship smartphone, the Galaxy Note, in the second half of the year. It is set to unveil its latest foldables on August 10.

But a dozen workers outside the factory interviewed by Reuters nearly all said business was not good.

Thuong and his friends who have worked for Samsung for about five years said they have never seen bigger production cuts.

“Of course, there is a low season every year, often around June-July, but low means no OT (overtime), no reductions in the working day like this,” Thuong said.

She said managers told workers that inventories were high and there weren’t many new orders.

Research firm Gartner expects global smartphone shipments to decline 6% this year due to reduced consumer spending and a sharp drop in sales in China.

CITY OF SAMSUNG

Samsung is Vietnam’s largest foreign investor and exporter, with six factories across the country, from industrial centers in northern Thai Nguyen and Bac Ninh where most phones and parts are made, to the factory in Ho Chi Minh- City manufacturing refrigerators and washing machines.

The South Korean company poured $18 billion into Vietnam, fueling the country’s economic growth. Samsung alone contributes one-fifth of Vietnam’s total exports.

Its arrival nearly a decade ago in Thai Nguyen, about 65 km (40 miles) from the capital Hanoi, transformed the area from a sleepy agricultural district into a sprawling industrial hub that now also manufactures phones for brands Chinese companies such as Xiaomi Corp (1810.HK).

Generous benefits, including subsidized or free meals and housing, have drawn tens of thousands of young workers to the area, but reduced working hours have now left many feeling the pinch.

“My salary was halved last month because I only worked four days and spent the remaining week doing nothing,” said Nguyen Thi Tuoi.

Job cuts are on the minds of some workers, but so far none have been announced.

“I don’t think there will be any job cuts, just some reductions in working hours to adapt to the current global situation,” said one worker, declining to be named because she does not didn’t want to risk his role as team leader.

“Hopefully the current cut won’t last long and we’ll get back to a normal pace soon.”

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Additional reporting by Khanh Vu in Hanoi and Joyce Lee in Seoul; Editing by Miyoung Kim and Stephen Coates

Our standards: The Thomson Reuters Trust Principles.

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