Daily Management Review

While Apple, Xiaomi, Others Hit By China Virus Problems, Samsung Stands To Benefit


While Apple, Xiaomi, Others Hit By China Virus Problems, Samsung Stands To Benefit
It has been more than a decade that the South Korean tech giant Samsung Electronics has invested in building production units for its smartphones in low cost Vietnam and now in the wake of the coronavirus outbreak in China, the company now stands to benefit as its major rivals including Apple announced production problems in China and issued a revenue warning for the current quarter on Monday.
Production in Vietnam now accounts for almost half of smartphones made by Samsung. The coronavirus outbreak has till now only had a limited impact in Vietnam. Supply chain and production operations of many companies including that of Apple in China have been crippled by the outbreak.  
China is where Apple majorly makes iPhones. The latest revenue warning from the company was attributed to both the production shutdown and the closure of its retail stores across China. Warnings about revenues and profits for the current quarter because of the coronavirus outbreak were issued last week by the Chinese smartphone maker Xiaomi Corp.
While no such announcement of its production being hit in China because of the coronavirus have been made by another major Samsung rival and Chinese smartphone firm Huawei, analysts and suppliers expect that the company too would be hit because of the closures and the heavy dependence on manufacturing of its smartphones and parts in China. While many production units in China have reopened, production and manufacturing have been constrained because shortages of workers and other issues which has forced production and output to be kept at minimum.
Over the recent years, the Chinese market has largely been given up to its rivals by Samsung which means that the impact of a closure of stores there because of the coronavirus and the consequent drop in demand will have very little impact on it – contrary to most of its rivals.
"Samsung is better positioned to weather the virus fallout than its formidable rivals such as Huawei and Apple," said a report quoting a a person with knowledge of Samsung's supply chain.  "The virus exposed China risks. We feel fortunate that we were able to escape the risks," the source reportedly said.
Reports also quoted other sources as saying: "Samsung does not say it publicly. But it is relieved."
There were however cautions issued by some analysts about the possibility of the prolongation of the virus outbreak which can have an impact on Samsung’s production operations in Vietnam. This is because many of the raw materials are sourced from China.
According to Hong Sun, vice chairman of Korea Chamber of Business in Vietnam, during the early phases of the virus outbreak, there were issued that cropped up with cross-border shipments since Vietnam had imposed strict border controls opt prevent the spreading of the virus from China. While those problems have apparently been resolved, there will be problems in Vietnam if workers in the supply chain companies in China are unable to get back to work soon, Sun said.