Many Korean companies began to cut or restructure production lines in China. This stems from recent political tensions, local competitive pressure.
Sources working at a large Japanese financial institution, often working with Korean companies, said: "They tried to extend this so as not to make the Chinese government have a bad impression, but now cannot delay it."Samsung is the company that started everything. With continuous sales plummeting in the last few years, market share dropped to below 1%, it will only be time before they close the last factory.
Samsung has tried its best to maintain production in China, because the closure will certainly put the government on board to protect people's jobs. However, recently, it seems that everything has ended when the company decided to give up the last effort. A South Korean employee said Samsung's move to remove it would remove the psychological barrier of other companies. Launching a chain of Korean companies also left China.
Samsung factory in China
Hyundai has temporarily suspended operations at a facility in Beijing, which has the capacity to produce 300,000 vehicles annually. KIA is also about to stop producing cars under this brand at the end of the month, in Jiangsu. KIA transferred the factory to its partner, Yueda Group. The plant is then structured to convert to electric vehicle production, following the trend in the Chinese market. Production of KIA SUVs is handed over to Yancheng Plant 2. According to the newspaper Business KoreaThe pressure on the two Korean automakers to close production is due to a decline in Chinese car sales.
Meanwhile, Samsung continues to make cuts, offering voluntary leave packages to workers at the factory in Guangdong province. LG recently moved its refrigerator production line from Zhejiang to Korea.
The fact that local companies are jumping into industries that are the strength of Korea such as chips and cars is increasing, causing Korean companies to be pulled back to the ground. Samsung dropped out of the top 10, Hyundai was only placed in the "lower projection" category, it was also surrendered, when market share was around 6 and 7. Previously, Samsung was leading the Chinese market in 2012, while Hyundai also ranked third in sales only after Volkswagen and General Motors. Things change so fast.
Hyundai had to close its first factory in China because of poor sales
Things escalated when the political crisis took place between Beijing and Seoul. Chinese people boycott Korean goods that make companies reel, even Lotte has to withdraw its entire supermarkets from here. Recently, the US-China war happened, making the business in China become confused. Korea's export turnover to China – the largest trading partner – has dropped by 20%.
The US embargo imposed on Huawei also hinders Korean companies. For example, Samsung's memory chip business, which is a "rice rod", can face an increase in inventories and prices decline faster than expected. Orders to Huawei can be stopped, making it harder for them to do business. Of course Samsung is very afraid of that happening.
In addition, the fact that two of the three major Korean carriers named Huawei from the 5G network development plan made Beijing unhappy with Korean companies. Nikkei write. Apart from Korean companies, some Japanese firms such as Sharp, Ricoh, Kyocera are also withdrawing their production lines from China, towards Southeast Asia, including Vietnam.