Further Shutdowns at Ningbo Plant
Samsung Heavy Industries has completed the shutdown of its local production subsidiary in China, Samsung Heavy Industries Ningbo Co., Ltd. This move comes as cost competitiveness in China has weakened due to reduced productivity and rising labor costs, eliminating the need for manufacturing facilities within China. As a result, Samsung Heavy Industries’ local factories in China have been reduced from three to one.
According to sources in the shipbuilding industry on Aug. 23, Samsung Heavy Industries has completed the shutdown of its production facility located in Ningbo, Zhejiang Province, China, during the first half of this year. The corporation sold its assets, including land, to the Chinese government.
Samsung Heavy Industries had previously announced its plan to shut down this facility in September 2021. Established in 1995, the production subsidiary had supplied ship blocks to the Geoje Shipyard for 26 years. However, due to the shipbuilding industry’s downturn and declining productivity, it had accumulated losses, leading to the decision to liquidate the subsidiary.
Samsung Heavy Industries’ withdrawal from China has been gaining momentum since the latter half of last year. Initially, the company had three production bases within China. It completed the sale of its entire 100 percent stake in one of the three at the end of last year. Samsung Heavy Industries had acquired that facility in 2008 and had been producing ship components, but it had experienced losses continually since 2014.
There are expectations that Samsung Heavy Industries’ only remaining production facility in China, Samsung Heavy Industries Rongcheng Co., Ltd., located in Rongcheng City, Shandong Province, will also eventually face liquidation. This ship component processing company has been incurring losses for three consecutive years since 2020.
Several other manufacturing companies are also in the process of withdrawing from China. Hyundai Steel, for instance, initiated the sale process of its Beijing and Chongqing subsidiaries in the first half of this year. It is reported that potential buyers are currently conducting due diligence. These factories have supplied automotive steel sheets to local Hyundai and Kia plants. However, the decision to sell was made due to a decline in local sales for Hyundai and Kia.
Companies in the steel industry, including POSCO and Dongkuk Steel, are also embarking on withdrawals from China. Last year, POSCO sold a 50 percent stake in its production subsidiary in Guangdong Province, while Dongkuk Steel sold a 90 percent stake in its Chinese subsidiary, DKSC, to the Jiangyin Municipal Government in Jiangsu Province.