SAMSUNG_Logo.jpgCould China's supremacy in mobile phone manufacturing be challenged? Not any time soon, you may think.

That's why we were intrigued to read that Korean phone giant Samsung may be planning to move its key production line for mobile handsets to Vietnam to reduce production costs as global competition intensifies.

If that last sentence was recast with “China” substituting
“Vietnam”, it would hardly be worth a note. The belief that China is
the place to go to reduce production costs is now so ingrained in the
electronics business that it has become accepted wisdom.

But China's undeniable advantages for churning out cheap handsets
and the like are relative and likely to be challenged more often in the
future, we suspect. The same fertile conditions that have made China
such a strong magnet for FDI could also arise in other emerging
economies, although clearly not on similar scale.

The take-home for western manufacturers is to look at the alternatives before blindly joining the exodus to China.

And for China, the advice is to invest in R&D and create a more
sustainable manufacturing sector before the laws of comparative
advantage start working against it.

Samsung's Vietnam factory, if completed, would have an annual
production capacity of 100m units, outpacing production at Samsung's
largest handset manufacturing factory, which is in Gumi, South Korea.
Needless to say, Samsung denied it had any definite plan to move
production to Vietnam, so China still has time to make it an offer it
cannot refuse.

IBM, Intel and Panasonic
are among other big hi-tech firms that have recently announced
investments in Vietnam — click the company names for the stories.

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