It’s getting more expensive to manufacture electronics in China. That’s why several companies including LG, Microsoft, and Samsung are moving operations to Vietnam where the labor is cheaper and the tax breaks are better. Samsung Electronics plans to build a second mobile phone plant in Vietnam for around $3 billion.
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Samsung is currently the largest mobile phone manufacturer in the world, but the gap is closing as Apple’s iPhone 6 gains in popularity. Apple is already a more valuable brand in many countries around the world. Motorola, Xiaomi, and Huawei have also all taken shares of the market from Samsung with their mobile phones.
There are several factors why Samsung is losing ground in the market, but it is partially because of their price. Samsung is one of the most expensive brands. Apple has the most expensive products, but Samsung is not far behind. People have been willing to pay a premium for Samsung in the past, but many mobile devices are much cheaper and people are starting to devalue Samsung.
Samsung’s move to Vietnam is a strategy to compete better in the mobile market on price. If they can manufacture their products for cheaper, they can sell them for cheaper, too. Cutting down on the cost of production even by $1 or $2 makes a huge difference, especially when you consider that millions of devices are being manufactured. The margin difference can mean that Samsung can bring down their price.
The International Business Times reports that Vietnam’s mobile phones and related exports have increased in the past year by 6.9 percent. Samsung plans to do what many other manufacturers are doing to keep their costs as low as possible. Only time will tell whether a move to Vietnam is a smart choice on their part or not. [/show_to]