Samsung’s decision to leave the manufacturing field will probably cost the Make in India movement a fortune and then some. Samsung, once again, chose to import air conditioning from Vietnam through the free trade agreement.
Read on to learn more about Samsung’s reasons behind this decision.
No More Manufacturing in India?
The stock market for Samsung air conditioners has been drastically reduced since fiscal year 2016 and has begun to import its high-end products, Wind-Free. This news is as reported by two top executives of the Korean company’s industry.
For those who are wondering what will happen to the company’s manufacturing plant in Chennai, executives have also confirmed the news about it. They plan to increase imports to other CA models and the CA production facility in Chennai will be used to manufacture other Samsung products.
In addition, Samsung planned to halt the manufacture of its flagship phones, Samsung Galaxy S9 and Note 9, but the company did not continue with the plan since the government delayed the Make in India plan for next year. This plan proposed that the components of smartphones, such as screens and touch panels, be manufactured in India itself.
Why does Samsung choose to import?
This is not the first time that Samsung decides to take such measures. Previously, Samsung also chose to shut down TV production in India and import from Vietnam.
The import duties on the compressors have increased: initially from 7.5% to 10% today, and under the FTA, this has made the imports of total CA considerably cheaper. “However, not all brands would benefit from such imports as Samsung, since they do not have a manufacturing base in the ASEAN FTA countries,” said one of the executives.
Another executive said that Samsung is still recovering from the losses it faced after leaving the field of the low-priced window that constitutes a third of the market. Some lower-priced brands entered the market and there was an additional concern of some brands that operated only on online platforms.
The Descending Shares of Samsung
From April to December 2018, Samsung India’s share of the air-conditioning market was reduced to 5%, which was 13.7% in FY16, according to the GfK sales tracker. Samsung has been the second largest producer of air conditioning in India. However, Tata Voltas is now the main CA company with a 22.8% share in the market during April and December, followed closely by LG India with 17.7%.