Consumer slowdown bites, pay of Samsung’s workers in Vietnam cut

Samsung is aiming for foldable phone sales to surpass that of its past flagship smartphone, the Galaxy Note, in the second half. Photo: Budrul Chukrut/SOPA Images/LightRocket via Getty Images

The workers of Samsung Electronics Co Ltd’s flagship smartphone-producing plant in Vietnam have borne the brunt of the production rollback that has been ordered amidst a global fall in consumer spending.

Retailers and warehouses grapple with rising inventory amid a global fall in consumer spending, while America's largest warehouse market bursts with unsold products. Major US retailers such as Best Buy and Target Corp have raised alarm calls over slowing sales as shoppers tighten their belts after early COVID-era spending binges.

Vietnam's northern province of Thai Nguyen, home to one of Samsung's two mobile manufacturing bases in the country, saw the phenomenon manifest in workers’ frustration over reduced working hours, lack of overtime and pay cuts.

Having refused to show up in front of a camera, workers told Reuters that their work days had been cut to just three days a week, while “some lines are adjusting to a four-day workweek instead of six before, and of course, no overtime is needed.”

Samsung, in Vietnam, the world's largest smartphone vendor churning out half of its phone output, shipped around 270 million smartphones in 2021, added that it had the capacity to make around 100 million devices a year.

Being Vietnam's biggest foreign investor and exporter, Samsung boasts six factories across the country, from northern industrial hubs Thai Nguyen and Bac Ninh where most phones and parts are manufactured to Ho Chi Minh City's plant making fridges and washing machines.

Contributing one-fifth of Vietnam’s total exports, Samsung has been powering the country’s economic growth by pumping into it USD 18 billion.

Its arrival nearly a decade ago in Thai Nguyen rejuvenated the area from a sleepy farming district into a sprawling industrial hub that now also manufactures phones for Chinese brands including Xiaomi Corp. Samsung also makes phones in South Korea and India.

Hazy horizons

Reuters was told by Samsung that it had not discussed reducing its annual production target in Vietnam.

However, the current slowdown in smartphone demand does not dishearten the South Korean tech giant as it entertains hope for a rebound in the second half, saying on its earnings call last week that supply disruptions had mostly been resolved and that demand would either stay flat or even see single-digit growth. Samsung is aiming for foldable phone sales to surpass that of its past flagship smartphone, the Galaxy Note, in the second half. August 10 is the scheduled date when Samsung would unveil its latest foldables.

Business is not good, a dozen workers reportedly told Reuters outside the factory.

Research firm Gartner expects global smartphone shipments to decline by 6 percent this year due to consumer spending cuts and a sharp sales drop in China.

The Samsung factory in Thai Nguyen, as well as other major technology companies, went through difficult times during the pandemic. Feeling the weight of supply chain disruptions worldwide, they could not afford to halt production in Vietnam and thus kept their factories going by any means possible. These included sequestering workers, subjecting them to strict virus controls, spending heavily on accommodation, raising wages — even, in some cases, securing early vaccine access.

The wages of Samsung workers in the Thai Nguyen factory vacillated, in 2018, around USD 180 per month, sometimes growing to USD 300 when overtime. With annual incentives and other benefits on the table, the working conditions have been considered still better than the average incomes in such rural areas.

It is difficult to say if Samsung’s decision to remove overtime and pay cuts due to the oversaturation of the market with tech products in times of cautious consumer frugality would lead to strikes in the world’s smartphone-producing capital.