A company source on Monday said Samsung Electronics has decided on a global sourcing system, abandoning its reliance on the Gumi plant. As part of the new strategy, Samsung will build a bigger plant in Vietnam in the fourth quarter of this year. That will eventually shift the firm’s phone production base, already partly based in China, abroad. The Gumi plant will probably maintain some kind of transitional role. Last year, Samsung produced a total of 130 million mobile phones, about 80 million (62 percent) at the Gumi plant. The plant in China produced 45 million units, or 35 percent of total production.

Next year, Samsung's domestic production will account for less than 40 percent. Annual production at the new Vietnam plant, which is expected to begin operating late next year at the earliest, will likely be 100 million phones, far more than Gumi’s. Production in China will also apparently rise to about 100 million next year. A mobile phone industry insider said Samsung has decided that its domestic plant is unattractive as a production base because labor costs are over 10 times higher than in Southeast Asia.

The decision reveals how dire leading companies feel the situation in Korea is. If they move their massive plants abroad, the hollowing of the domestic industry will gain pace - a development that will drastically worsen already high youth unemployment here.

This is not the first time Samsung Electronics has moved production overseas. But the nature of plant transfers has changed. Around 2000, when the exodus started, plants that moved overseas were simple assembly lines for electrical home appliances. Despite the high wages, cutting-edge industries such as cell phones, LCDs and semiconductors, remained in Korea due to their high profitability and fears of a technology drain. Samsung's latest decision opens up a vista where any production can move abroad.

Already, Samsung’s decision to stop hiring in Gumi means that 800 jobs have effectively disappeared this year. Last year, the plant’s 4,000 workers produced 80 million phones. By simple arithmetic, about 5,000 more jobs stand to disappear if the Vietnam plant produces 100 million units per year. When Samsung’s plants in China and India are boosted to produce 60 million more phones than they do now, another 2,000 to 3,000 jobs will be created there instead of here as well.

Tech-savvy component companies will build their own plants in Vietnam or China following in the footsteps of Samsung Electronics, said Song Myung-sup, an analyst at CJ Investment & Securities. “Those who don't will be dealt a severe blow." Daishin Securities analyst Kim Gang-oh said, "Domestic companies will also speed up globalization of component production, because they will have to compete with international companies capable of securing cheaper parts.” Strategies to advance into growing markets will accelerate the development, he added.

(englishnews@chosun.com )