Text / Reporter Jia Aosheng
According to Cailian News on September 25, since September 9, a large-scale strike has occurred in a factory of Samsung Electronics in India, and at present, the situation is quite serious.
The strike was caused by workers' dissatisfaction with wages and working conditions. For this strike, the factory workers mainly have several demands, one is a wage increase, the workers demand that the average monthly salary be increased from the current 35,000 Indian rupees (about 2,943 yuan) to 71,000 India rupees (about 5,969 yuan) within three years; the second is to reduce working hours to reduce the working week to 35 hours; the third is to realize the family inheritance system for jobs, that is, if an employee dies, family members are allowed to inherit their jobs, and private school tuition subsidies are provided for employees' children.
(图源:OLANREWAJU SODIQ)
India's manufacturing plan frustrated Samsung factory strike sparked turmoil
Samsung Electronics' factory near Chennai, the capital of Tamil Nadu, India, has about 1,800 employees and is an important production base for the company in India, mainly producing household appliances such as TVs, refrigerators and washing machines, contributing 20%~30% to Samsung's annual revenue of 12 billion US dollars (about 84.744 billion yuan) in India.
At present, the plant's output has dropped to 25% of its usual level due to strikes, and almost half of its daily output has been affected. The strike is considered one of the biggest industrial turmoil in India in recent years.
On September 16, India police arrested more than 100 workers for conducting strike tours without permission, and although they were released that night, strike organizers remained in custody. The incident has had an impact on the image of India's manufacturing sector, especially in the context of the India government's push for the 'Make in India initiative to attract foreign investment.
Samsung Electronics' business in India is currently facing turmoil, and the company recently began to compensate some mid-level employees for layoffs, potentially involving up to 1,000 people. In addition, Samsung is also working on a global layoff plan that could involve up to 30% of its overseas workforce.
(SOURCE: MONEYCONTROL NEWS)
According to CITU, which organised the strike, the workers are currently earning an average monthly wage of 25,000 rupees (about 2,118 yuan), and they are demanding an increase in wages of 36,000 rupees (about 3,050 yuan) per month for three years, and they are demanding that Samsung recognize the unionization of the factory. Tamil Nadu's labour minister, Veera Raghava Rao, said efforts were being made to resolve the dispute, but Samsung had warned that workers would not receive their wages if the strike continued.
For Samsung, the current situation is not without seriousness, as production has dropped to 25% of normal due to strikes, and the capacity gap of Samsung's India factory is 75%. This will have a serious impact on the order delivery of downstream customers, and may even lead to some orders not being completed on time.
If the supply chain is disrupted due to a strike, it will have a significant impact on Samsung's existing business system.
Overall, the strike at Samsung Electronics' India factory not only involved labor disputes, but also reflected the challenges facing the company's global business adjustment.
A new industrial layout from China to Southeast Asia
In recent years, Samsung Electronics is accelerating the shift of its manufacturing operations from China to Southeast Asia, especially to Viet Nam and India.
Industry analysis notes that China's labor costs have risen significantly in recent years, in stark contrast to the low costs in Viet Nam and India. In China, the average monthly salary of manufacturing workers is about 500~600 US dollars (about 3531~4237 yuan), while in Viet Nam and India, this figure drops to 200~300 US dollars and 100~150 US dollars (1412~2118 yuan and 706~1059 yuan) respectively. This significant cost difference has prompted multinational companies such as Samsung to re-evaluate their global production base options.
In addition to labor costs, global geopolitical uncertainties, especially the volatility of the U.S.-China trade relationship, have also pushed Samsung to seek a more diversified and flexible supply chain strategy. The global spread of the pandemic in 2020 further revealed the fragility of the single supply chain model and strengthened the need for supply chain resilience.
In 2019, Samsung closed its last smartphone factory in China, marking a major curtailment of its manufacturing operations in China. At present, Samsung's production capacity in Viet Nam accounts for about half of its total global production capacity, while production capacity in India is also steadily increasing.
When it comes to supply chain costs, India and Viet Nam offer advantages that go beyond cheap labor. These countries also offer relatively cheap land costs and a range of incentives, such as tax breaks, land subsidies, etc., to attract foreign direct investment. For example, Viet Nam offers corporate income tax relief for foreign investors for up to 8 years, while India offers tax incentives for up to 15 years in specific regions.
Location is also an important factor for Samsung. Viet Nam and India's proximity to Southeast Asian markets is one of the fastest growing regions in the world, helping to reduce logistics costs and improve market responsiveness. According to statistics, the logistics cost from Viet Nam to the main markets in Southeast Asia is about 20%~30% lower than that from China.
Overall, the advantages of India's supply chain are mainly reflected in low cost and geographical location. India has a huge labor resource, labor costs are relatively low, land costs and tax incentives are also relatively favorable, which is conducive to reducing the manufacturing costs of enterprises. In addition, India's proximity to the Southeast Asian market is conducive to reducing logistics costs and improving market responsiveness.
However, there are some disadvantages in India's supply chain. First of all, India's infrastructure is relatively weak, such as transportation, electricity and other infrastructure construction is not perfect, which will affect the efficiency of the supply chain. Second, India's policy environment is relatively volatile, and policy changes may have an impact on supply chains. Cultural differences can also pose challenges to supply chain management, and this strike is a clear sign of this.
All in all, Samsung Electronics' global manufacturing shift strategy is not only a response to cost pressures, but also an adaptation to changes in the global market, demonstrating the company's flexibility and foresight in the face of global competition.
Samsung leads the global market with a declining market share in China
In 2023, the global smartphone market will see a 4% decline in total shipments to 1.14 billion units. In this market, Samsung has a 20% market share with 225.4 million units shipped, and its performance is eye-catching, even surpassing Apple to become the leader.
However, in the Chinese market, Samsung is facing a different situation. In the competition with Chinese brands such as Huawei, OPPO, vivo, and Xiaomi, Samsung seems to be powerless, and its market share and influence are weak. With the rapid rise of Chinese brands, Samsung's share of the Chinese market has further declined.
According to data from Counterpoint, Canalys and BCI, China's smartphone market is showing a new trend in 2023, with Apple leading the way with a market share of 17.9%, followed by vivo, OPPO, Honor, Xiaomi and Huawei. Samsung's share of the Chinese market has not increased significantly, and it has almost disappeared from the sales figures. Despite Samsung's strong performance in the India market, India-made smartphones have little impact on the Chinese market.
(图源:infoNEGOCIOS)
Samsung's challenges in the Chinese market remain severe, and more precise marketing strategies are needed to improve its position in the hearts of Chinese consumers.
Samsung Electronics' factory strike in India is an important warning for Chinese mobile phone makers operating in India. These manufacturers, including brands owned by Xiaomi, OPPO, vivo, realme, OnePlus, Honor and Transsion Holdings, need to learn lessons from labor relations management, supply chain diversification, policy compliance and market adaptability to optimize their operational strategies in India.