Vertical Adjustments
Samsung Electronics appears to have a cautious attitude toward its investment in production facilities of mobile phone parts.
According to industry sources on July 5, Samsung is adjusting its mobile phone component facilities in Vietnam after expanding its production capacity until the first quarter of this year. With lackluster sales of the Galaxy S6 starting in Q2, the Korean tech giant reportedly discontinued purchasing additional computer numerical control (CNC) milling machines, one of the core pieces of production equipment of the metal cases for smartphones.
Samsung started to pour a lot of money into CNC milling machines last year, prior to the mass production of the Galaxy S6. Industry analysts are saying that it brought thousands of CNC milling machines into the factory in Vietnam, even though the machine is worth about 100 to 200 million won (US$88,555 to $177,110) per unit.
Some in the industry are raising the possibility that the company might dispose of some of its mobile phone part production facilities in Vietnam and Korea (Gumi) to its affiliates. In particular, Samsung is said to be considering selling off its Samsung Fiber Optics' camera module business to Samsung Electro-Mechanics, after the tech firm merged the camera module business into its wireless business unit in 2012. The Korean tech company sold its optical material business to Corning in March of this year.
In the past, Samsung Electronics maintained a system that encourages competition between its affiliates related to mobile phone parts, including Samsung Electro-Mechanics and Samsung Fiber Optics, in order to strengthen its camera module business. Since the competitive system didn't generate huge profits, the company merged Samsung Fiber Optics again. Since then, Samsung's wireless business unit and Samsung Electro-Mechanics have been producing components for camera modules at the same time.
Experts are saying that Samsung's adjustment in production capacity like this is somewhat relevant to the Samsung Group's efforts to revamp the organizational structure of its electronics affiliates.