The Economic Times: March 09, 2015
New Delhi: Samsung Electronics is considering setting up its third manufacturing plant in India, a move that would consolidate the South Korean company's hold on a key market and provide a big push to the government's 'Make in India' campaign. The company, among India's largest multinationals, is scouting for land in Uttar Pradesh, Tamil Nadu and Gujarat for a new plant to make electronic goods, including smartphones, people familiar with the matter said.
A Samsung spokesperson confirmed the company's plans. "Samsung Electronics sees India as a very important market. Being a leading player in the consumer electronics and durables business and India's biggest television and smartphone manufacturer, we are committed to the idea of 'Make for India'," the spokesperson said.
He declined to comment on investment details. "However, we can confirm that we are in talks with state governments, including the government of Uttar Pradesh, where we have a factory already." One of the people said Samsung mobile division chief JK Shin recently visited India to discuss the new plant, adding that the company may invest $500 million to $1 billion, depending on the size of the land and other modalities. "It may even look to export from the plant at a later stage," the person said.
A senior Uttar Pradesh government official told ET on condition of anonymity that Samsung executives have held meetings to discuss the possibility of setting up a new manufacturing facility in the state.
The Korean giant has also approached Gujarat and Tamil Nadu, although talks are progressing quicker in Uttar Pradesh. The company signed a memorandum of understanding with the UP government in January to expand its electronics and phone making plant in Noida with an investment of Rs 517 crore.
Samsung, in India for 20 years, has two factories - in Noida and Tamil Nadu, where it makes 90% of the handsets it sells in the country - and three R&D facilities. It employs some 45,000 employees.
Smartphones have emerged as its biggest revenue generator, contributing over 60% of its top line, although the segment is under severe pressure in India as well as globally.
Analysts say local production would give Samsung a cost advantage and provide scale and velocity to respond to demands of the Indian handset market, the second-fastest growing in the world, as the company takes advantage of the government's sops to push domestic manufacturing.
Late January, Samsung reported a 23% decline in profit to 23.4 trillion won ($21.2 billion) in 2014, its first annual earnings drop in three years, dragged by falling sales of its smartphones under pressure from the likes of Apple and China's Xiaomi. This forced the company to freeze salaries in 2015 for employees in South Korea for the first time in six years. The company had cash of 61.8 trillion won ($56 billion) at the end of December.
While analysts are sceptical of any turnaround in its handsets business as margins remain under pressure, they are betting on improved performances of components such as chips and panels.
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