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Samsung shifts some smartphone production to Vietnam due to coronavirus

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Gumi factory in South Korea temporarily closed as Covid-19 cases rise

Samsung Electronics will shift part of its domestic phone production to Vietnam due to the fast spread of coronavirus in South Korea. The outbreak has forced frequent shutdowns of its home plant, causing disruption to premium smartphone production for the local market. Samsung on Friday closed the smartphone plant in Gumi, the industry city in the south-eastern party of the country, as the number of confirmed cases of Covid-19 in the factory rose to six. The Gumi plant is near Daegu, the country’s fourth-largest city, which is at the heart of the virus outbreak in South Korea. The company has been producing its latest flagship smartphone, the Galaxy S20, and new foldable phone, the Galaxy Z Flip, in Gumi, for domestic consumers. Samsung said the decision to shift to Vietnam was made to ensure “stable production” of its high-end smartphones. About 200,000 units of premium smartphone production per month will move to Vietnam. “In order to minimise the potential impact from coronavirus on our operations, we are temporarily allocating a small portion of our production from the Gumi complex in Korea to Vietnam,” the company said. “This is a precautionary decision to best serve our consumers and we will return Gumi’s production to normal levels when appropriate.” South Korea has reported more than 6,500 infections so far, making it the worst-hit country outside of China. Samsung’s Gumi plant, which has about 10,000 workers, has been frequently shut down in recent weeks because many workers were quarantined amid increasing infections. The company said the plant will resume operations on Saturday afternoon.

South Korean technology companies are facing the increasing prospect of damaging disruption to their supply chain as health authorities struggle to contain the outbreak. Some domestic parts makers have reported problems sourcing from China and Vietnam in recent weeks and disruptions to local production, amid increasing infections and worker quarantines in the region. “Our inventories have become tight since the virus outbreak. Now, we have two weeks of inventories from three weeks of inventories before,” said an official at MCNEX, a camera module maker for smartphones and auto electronics. Innox Advanced Materials, which makes materials for semiconductors and organic light-emitting diode (OLED) panels, said orders had fallen since the virus outbreak. “We have seen some delay in parts and materials supply to our domestic plants as well as those in Vietnam and China,” said a company official. “Things are still manageable, but there will be no company that can survive this crisis if the current situation continues for long.”

Samsung recently began to fly electronic components for its new Galaxy phones from China to its factories in Vietnam as the flow of goods between the two countries is restricted. More than half of Samsung’s smartphones are produced in Vietnam. South Korean companies are scurrying to stop workers getting infected, taking various precautionary measures. They are encouraging employees to work from home and asking them to refrain from taking business trips and having external meetings.

By Song Jung-a – The Financial Times – March 6, 2020

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