THAI GUEN, Vietnam: Samsung Electronics Co Ltd has cut production at its largest smartphone plant in Vietnam, employees said, as retailers and warehouses face rising inventories amid a global slowdown in consumer spending. .
The largest U.S. warehouse market is crowded and major U.S. retailers such as Best Buy and Target Corp have warned of a drop in sales as shoppers tighten their belts after the initial spending spree of the COVID-19 era.
The impact has been keenly felt in Vietnam’s northern province of Thai Nguyen, home to one of Samsung’s two mobile manufacturing bases in the country where the world’s biggest smartphone vendor makes half of its phone production. , according to the Vietnamese government.
Graphic: US business inventories climb on restocking, consumer spending slows – https://fingfx.thomsonreuters.com/gfx/ce/lgpdwywgrvo/USTradeInventories.png
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 are only going to work three days a week, some lines are adjusting to a four-day workweek instead of the previous six, and of course no overtime is needed,” said Pham Thi Thong, a 28-year-old worker at the plant. told Reuters.
“Business activity was even stronger last year during the peak of the COVID-19 pandemic. Now it’s very hot.”
Reuters could not immediately determine whether Samsung was moving production to other manufacturing bases to make up for lower output from the Vietnamese factory. The company also makes phones in South Korea and India.
Samsung told Reuters it had not discussed lowering its annual production target in Vietnam.
The South Korean tech giant is relatively optimistic about smartphone demand in the second half, saying on its earnings call last week that supply constraints have largely been resolved and that demand will be either flat or in the single digits. Will also see growth.
It aims to overtake its previous flagship smartphone, the Galaxy Note, in sales of the foldable phone in the second half. It is expected to unveil its latest foldables on August 10.
But a dozen workers interviewed by Reuters outside the factory said business was not good.
Thong and his friends, who have worked for Samsung for about five years, said they had never seen such a deep drop in production.
“Of course there is a down season every year, often around June-July, but down doesn’t mean no OT (overtime), not a reduction in the workday as such,” Thong said.
He said managers had told workers inventory was high and there weren’t many new orders.
Research firm Gartner expects global smartphone shipments to fall 6 percent this year due to lower consumer spending and a sharp decline in sales in China.
Samsung is Vietnam’s largest foreign investor and exporter, with six factories across the country, from the northern industrial hubs of Thai Nguyen and Bac Ninh to a refrigerator and washing machine plant in Ho Chi Minh City, where more Phones and accessories are manufactured.
The South Korean company has poured $18 billion into Vietnam, boosting the country’s economic growth. Samsung alone accounts for a fifth of Vietnam’s total exports.
Its arrival in Thai Nguyen, about 65 kilometers (40 miles) from the capital Hanoi, about a decade ago transformed the area from a sleepy farming district into a sprawling industrial hub that is now home to Chinese brands including Xiaomi Corp. It also manufactures phones.
Generous benefits, including subsidies or free food and housing, have drawn tens of thousands of young workers to the region, but reduced working hours have now left many feeling the pinch.
“Last month my salary was cut in half because I only worked four days and did nothing the rest of the week,” said worker Nguyen Thi Tuoi.
Job cuts are on the minds of some workers but none have yet been announced.
“I don’t think there will be any job cuts, given the current global situation, there will be some reduction in working hours,” said one worker, who declined to be named as he took on his role as a team leader. I didn’t want to risk it.
“I hope the current cuts don’t last long and we’ll be back to normal speed soon.”
(Additional reporting by Khan Wu in Hanoi and Joyce Lee in Seoul; Editing by Myung Kim and Stephen Coates)
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