Samsung Gets Vietnam Factory Back On Line
As we noted in our 10-18-21 note, a number of the factories in Ho Chi Minh City had been under partial quarantine or reduced staffing as the city faced a number of COVID-19 outbreaks in September and October. Last month it was estimated that Samsung’s (005930.KS) plant in the Saigon Hi-Tech Park 10 miles outside of the city, was operating with about 50% of its normally ~7,000 employees, with the company helping those workers who wished to stay during travel restrictions by providing local sleeping and eating arrangements.
The factory, which assembles both Samsung TVs and home appliances has been in operation since 2016 and generated over $5.3b in revenue last year, making it the 2nd largest Samsung assembly facility. Samsung generating more than $56b in export sales in Vietnam and produced over 19m units last year, so low level production at this factory does have a material effect of Samsung’s overall CE sales, which grew 0.1% y/y in 3Q, with the TV segment declining 5%. Expectations were that the factory would be back to full production by the end of this month as the city eases travel restrictions, but it seems that Samsung has been working with the local government to accelerate that timeline and has brought the lines back to full production last week, considerably ahead of schedule.
Over the last five years TV shipments in the 4th quarter averaged 28.8% of the full year total, but that included 2020 which saw an unusual 2Q as government stimulus checks pulled in normal seasonality. Looking at the four years without 2020, the average is just under 31%, making it essential that Samsung squeeze out as much as possible from this factory in order to meet its unit volume targets. Samsung has been fighting a battle against both its local rival LG Electronics (066570.KS) and Chinese brands, particularly TCL (000100.CH) who has been accepted by a number of US retailers over the last two years and has become a major player in the North American market, while Xiaomi (1810.HK) has expanded significantly in China and Asian markets.
The factory, which assembles both Samsung TVs and home appliances has been in operation since 2016 and generated over $5.3b in revenue last year, making it the 2nd largest Samsung assembly facility. Samsung generating more than $56b in export sales in Vietnam and produced over 19m units last year, so low level production at this factory does have a material effect of Samsung’s overall CE sales, which grew 0.1% y/y in 3Q, with the TV segment declining 5%. Expectations were that the factory would be back to full production by the end of this month as the city eases travel restrictions, but it seems that Samsung has been working with the local government to accelerate that timeline and has brought the lines back to full production last week, considerably ahead of schedule.
Over the last five years TV shipments in the 4th quarter averaged 28.8% of the full year total, but that included 2020 which saw an unusual 2Q as government stimulus checks pulled in normal seasonality. Looking at the four years without 2020, the average is just under 31%, making it essential that Samsung squeeze out as much as possible from this factory in order to meet its unit volume targets. Samsung has been fighting a battle against both its local rival LG Electronics (066570.KS) and Chinese brands, particularly TCL (000100.CH) who has been accepted by a number of US retailers over the last two years and has become a major player in the North American market, while Xiaomi (1810.HK) has expanded significantly in China and Asian markets.
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