May 4 (NBD) -- Shenzhen Samsung Electronics Telecommunication Co., Ltd. (Shenzhen Samsung), the telecom equipment manufacturing unit of South Korea's electronics giant Samsung Electronics Co., was to be closed, having laid off all of its 297 employees and reached economic compensation agreement with them, said a person-in-charge at the Shenzhen plant.

Sources said to NBD that the output of the plant had been very low since the beginning of this year, and layoff plan was announced internally on March 30th.

When asked about the reasons behind, the above-mentioned person-in-charge told NBD that for five years ever since the plant transformed to manufacture telecom base station equipment, things hadn't turned out as expected. It seems difficult to gain a foothold in Chinese market even though the upcoming 5G era will bring huge opportunities, added the person.

Public information shows Shenzhen Samsung was founded in 2002 with a registered capital of 20 million U.S. dollars. The company posted a revenue of 1.808 billion yuan (284.6 million U.S. dollars) and 2.343 billion yuan (368.9 million U.S. dollar) in 2016 and 2017, respectively.

Sources inside Shenzhen Samsung said to NBD that the plant was responsible for only manufacturing, while the R&D and sales part was undertaken by other companies. The Shenzhen plant failed to secure a single sales order of network equipment in the 4-5 years after the transformation, but took orders from its South Korea headquarters instead, according to sources.

The fore-mentioned person-in-charge echoed, saying that the headquarters expected the big difficulty in entering the Chinese communication equipment market, considering Shenzhen Samsung stood at a disadvantage against China's top telecom gear suppliers Huawei and ZTE. Besides, a variety of factors should be weighed when it came to exploiting the market of network base station, added the person.

The report of global information provider IHS Markit shows that Huawei dethroned Ericsson to become the world's largest manufacturer of telecom equipment last year, with its mobile infrastructure business grabbing 28 percent of global market share. Ericsson, with its global mobile infrastructure equipment share dropping from 28 percent in 2016 to 27 percent in 2017, took the second place, followed by Nokia (23 percent), ZTE (13 percent) and Samsung (3 percent).

Telecom industry observer Liu Jie told NBD that over the past several years, Samsung took a small slice of the telecom equipment sector which was mostly carved up by Huawei, ZTE, Nokia and Ericsson.

People familiar with the matter at Samsung (China) Investment Co., Ltd. said to NBD that the decision to close Shenzhen Samsung was based on Samsung's business strategy and aimed to enhance the competitiveness of Samsung's network business, and China remained an important market for Samsung.

Email: gaohan@nbd.com.cn