**Seoul**: Samsung Electronics is grappling with significant supply chain challenges due to tariffs imposed by the Trump administration, affecting its smartphone and semiconductor divisions. The company is considering adjustments to its manufacturing strategies to mitigate potential price increases for consumers in the U.S.
The Korea Times has reported that Samsung Electronics is facing significant challenges related to the tariff pressures imposed by the Donald Trump administration, which are testing the resilience of its supply chain across various business segments, including smartphones, semiconductors, and home appliances.
The company is currently assessing the impact of these tariffs on its global manufacturing operations, particularly within its smartphone division, which is understood to be the most vulnerable to these changes. As of now, approximately 50 per cent of Samsung’s Galaxy smartphones are produced in Vietnam, with around 30 per cent coming from India. The remaining production is distributed among facilities located in Brazil, Korea, and Indonesia.
Recently, Trump announced extensive “reciprocal” tariffs on U.S. trading partners, which include a staggering 46 per cent tariff on goods from Vietnam. Other targeted nations experienced significant levies as well, including India at 26 per cent, Korea at 25 per cent, and Indonesia at 32 per cent. If Samsung decides to transfer these additional costs onto consumers, the retail prices of Galaxy smartphones in the U.S. could increase by as much as 46 per cent.
Initially, analysts believed that the price competitiveness between Galaxy smartphones and Apple’s iPhone series would remain stable, since Apple would also face similar tariff impacts. However, production insights reveal that approximately 80 per cent of Apple’s iPhones are produced at Foxconn’s plant in Zhengzhou, China, which has been affected by a 54 per cent duty under the new tariffs. Consequently, reports suggest that iPhone prices could rise by 30 to 40 per cent as a result.
Concerns have been raised regarding the possibility of the U.S. granting a tariff exemption for Apple products, thus giving Apple an advantage in the market. An IT industry official stated, “Given the precedent of Apple avoiding tariffs on China during the first Trump administration, it is hard to rule out the possibility the U.S. may grant an exemption on Apple products.” This concern is compounded by Apple’s previous success in obtaining tariff exemptions on components manufactured in China in 2019, which was granted in part due to Apple’s commitment to enhance U.S. manufacturing operations.
In light of these developments, Samsung’s mobile division may consider adjusting its manufacturing strategies. According to the aforementioned official, “One of the most viable and immediate options for Samsung’s mobile division is to rebalance its regional manufacturing capacities and redirect shipping destinations.” Given that Brazil only faced a 10 per cent tariff under the latest measures, enhancing production at Brazilian facilities while targeting markets outside the U.S. for products made in Vietnam could be a strategic move.
Samsung’s home appliance sector is also navigating complexities due to the tariffs. The company primarily manufactures U.S.-bound TVs and appliances within Mexico and the U.S., though some production occurs in Vietnam. The absence of tariffs on goods compliant with the United States-Mexico-Canada Agreement (USMCA) has provided some relief, allowing Samsung to potentially augment production in Mexico to mitigate tariff effects. Nevertheless, the future of this policy remains uncertain, and the company is considering increasing its manufacturing output at U.S. plants.
The most ambiguity surrounds Samsung’s semiconductor business. Current tariff measures do not apply to chips; however, there are indications that the Trump administration is contemplating imposing tariffs exceeding 25 per cent specifically on chips manufactured outside the U.S. Chips accounted for 7.5 per cent of Korea’s direct exports to the U.S. last year, predominantly sent after being assembled into finished products in countries like Taiwan and Vietnam.
Industry analyst Kim Kwang-jin from Hanwha Investment & Securities articulated concerns over the potential downstream effects, stating, “If high-bandwidth memory chips manufactured in Korea are exported to Taiwan, assembled into artificial intelligence (AI) server racks there and shipped to the U.S., the final products would be subject to tariffs.” This could precipitate increased costs across the supply chain affecting computers, smartphones, and other technology sectors, depending on how manufacturers decide to manage the costs associated with the tariffs.
Source: Noah Wire Services
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