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September 06, 1996 in Social Responsibility News

SAMSUNG Makes Major Inroads in the Chinese Appliance Market

The plant is located on a 214,500 sq. meter site Suzhou Complex, and Samsung will invest US$ 170 million in the operation by 1999. Initial production to be refrigerators and microwave ovens ; washing machines and air conditioners to be added in 1997. Samsung expects sales in China to reach US$ 2.5 billion by 2000, making the company one of the nation*s top 3 appliance makers.

Samsung Electronics Co. has been investing heavily since last year to break into the Chinese home appliances market. Now, a local appliance plant has been completed and is expected to have a major impact on Samsung*s market position in China. Over 500 workers as well as company and local government officials were on hand for the ceremony, held on September 6 at Suzhou, to dedicate Suzhou Samsung Electronics Co. (SSEC).

This means that Samsung now has production facilities covering parts and finished goods at four different locations in China, including audio system, TV and VCR plants at Tianjin and Huizhou; a semiconductor plant at Suzhou and a telephone switching system plant at Weihai. Samsung is also building an integrated marketing system to cover all of China.

SSEC was established as a joint venture in February 1995 so that Samsung Electronics could become heavily involved in China*s appliance market. The joint venture partners are Samsung Electronics (80%) and Suzhou Xiangxuehai Electric Corp. (20%). The production complex is on a site of 33,000 square meters.

In its first year of operation, SSEC will produce 150,000 refrigerators and 100,000 microwave ovens. This output will represent US$ 40 million in sales. In 1997 production will be expanded to include 300,000 refrigerators, 250,000 microwave ovens, 200,000 air conditioners and 50,000 washing machines a year. With that expansion, annual sales are expected to reach US$ 150 million.

By the year 2000, the complex will be capable of turning otut 2 million refrigerators, 1.6 million microwave ovens, 1.7 million washing machines and 500,000 air conditioners annually. Sales will soar to US$ 2.5 billion a year, making SSEC China*s third-largest appliance maker.

Samsung Electronics needs to build up a system that ensures a stable supply of parts and components and keeps the finished goods competitive in the market. Therefore, subcontracted suppliers and separate plants for compressors, magnetrons and other key components will be set up in stages. Local product planning and development capabilities will also be cultivated so that the entire operation, from R&D to sales, can be done in China.

Demand in the Chinese market is rapidly moving toward refrigerators, washing machines and other established appliance items that are high quality and large. The demand for air conditioners and microwave ovens is just starting to take off, especially in China*s largest cities. The SSEC complex at Suzhou is expected to play an important role in Samsung*s position in the Chinese appliance market.

Reference Data1.Suzhou Integrated Complex
1) Official name : Suzhou Samsung Electronics Co.
2) J/V partner : Suzhou Xiangxuehai Electric Corp.
3) Total investment : US$ 170 million ( over 5 years, *95-*99 )
4) Invested capital : US$ 42.5 million ( 80:20 equity, with SEC holding the major share )
5) Establishment : February 13, 1995
6) Workers : 1,050 ( including 20 from Korea )
7) Annual Production Plan

  Refrigerators MWO W/M A/C Annual Sales 1996 150,000 100,000r --- --- US$ 40 mil. 1997 300,000 250,000 50,000 50,000 US$ 150 mil. 2000 2 mil. 1.6 mil. 1.7 mil 500,000 US$ 2.5 bil.

2. SEC Plants in China

Location Name Products Annual
Production Operation
Startup Suzhoucomplex SSEC refrigerators
MWO 150,000
100,000 Sep. 1996 Tianjin TSEC VCRs 600,000 Jun. 1993 Tianjin TTSEC CTVs 1.25 mil. Jan. 1995 Huizhou SEHZ audio
Systems 900,000 Jul. 1993 Weihai SST switching
systems 330,000 Sep.1993 Suzhou SSEC transistors,IC
assembly 40 mil. Jul. 1996

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