Samsung poised to benefit from virus woes afflicting rivals

Samsung is better positioned to weather the virus fallout than its formidable rivals such as Huawei and Apple. (Reuters)
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Updated 18 February 2020

Samsung poised to benefit from virus woes afflicting rivals

  • “Samsung does not say it publicly. But it is relieved.”

SEOUL: Samsung Electronics stands to be a major beneficiary of the China production problems announced by rival Apple Inc on Monday, reaping the rewards of a decade-long bet on low-cost smartphone manufacturing in Vietnam.

Half of Samsung’s smartphones are now made in Vietnam, where the coronavirus that has crippled the China operations of Apple and many other firms has so far had only a limited impact on its production.

Apple said on Monday it would not meet its revenue guidance for the March quarter due to the coronavirus impact on both production and sales in China, where most iPhones are made. Chinese smartphone maker Xiaomi Corp last week also flagged a hit to its March quarter sales.

Huawei, another major Samsung rival, has not announced any production problems, but Samsung insiders, analysts and suppliers expect it will also be hit hard due to its heavy reliance on Chinese manufacturing and parts. Many Chinese and foreign firms have begun to re-open China factories that were idled for weeks, but shortages of workers and other problems have in many cases kept output to a minimum.

Samsung has also largely ceded the China market to its rivals in recent years, meaning it won’t suffer from the store closures and drop in demand that is hitting Apple and others.

BACKGROUND

5G — Before the virus, the smartphone market had been expected to end two consecutive years of falls due to smartphones running on faster 5G wireless networks. But the outbreak will dampen hopes of a rebound, with global shipments likely to record another decline.

“Samsung is better positioned to weather the virus fallout than its formidable rivals such as Huawei and Apple,” a person with knowledge of Samsung’s supply chain said.

“The virus exposed China risks. We feel fortunate that we were able to escape the risks,” he said.

Another person familiar with Samsung’s thinking told Reuters: “Samsung does not say it publicly. But it is relieved.”

Still, two sources familiar with Samsung’s Vietnam operations cautioned that should the virus outbreak be prolonged, Samsung would feel the impact, as the company sources many components from China.

Problems with cross-border shipments also cropped up in the early phases of the virus outbreak as Vietnam imposed stricter border controls, according to Hong Sun, vice chairman of Korea Chamber of Business in Vietnam. The issues have since been resolved, Sun said, but risks remain if Chinese parts suppliers cannot get back to work.

Samsung also relies on Chinese contract manufacturers for some low-end models.

In a statement, the company said: “We are making our best effort to minimize any impact on our operations.”


$8bn blow to Erdogan as investors flee Turkey

Updated 09 July 2020

$8bn blow to Erdogan as investors flee Turkey

  • Overseas holdings in Istanbul stock exchange are at lowest in 16 years

ANKARA: Foreign capital is flooding out of Turkey in a massive vote of no confidence in President Recep Tayyip Erdogan’s economic competence.
Overseas investors have withdrawn nearly $8 billion from Turkish stocks since January, according to Central Bank statistics, reducing foreign investment in the Istanbul stock exchange from $32.3 billion to $24.4 billion.
As recently as 2013, the figure was $82 billion, and foreign investors now own less than 50 percent of stocks for the first time in 16 years.
“Foreign investment has left Turkey for several reasons, both internal and external,” Win Thin, global head of currency strategy at Brown Brothers Harriman, told Arab News.
“Externally, investors fled riskier assets like emerging markets during the height of the coronavirus pandemic. Some of those flows are returning, but investors are being much more discerning and Turkey does not seem so attractive.”
In terms of internal factors, Thin said that Turkish policymakers had made it hard for foreign investors to transact in Turkey. “This includes real money clients, not just speculative.
“By implementing ad hoc measures to try and limit speculative activity, Turkey has made it hard for real money as well. Besides these problems, Turkey’s fundamentals remain poor compared to much of the emerging markets.”
Erdogan allies claim international players are manipulating the Istanbul stock exchange through automated trading, and have demanded action to make it difficult for them to trade in Turkish assets.
Goldman Sachs, JPMorgan, Merrill Lynch, Barclays and Credit Suisse were banned this month from short-selling stocks for up to three months, and this year local lenders were briefly banned by the banking regulator from trading in Turkish lira with Citigroup, BNP Paribas and UBS
JPMorgan was investigated by Turkish authorities last year after the bank published a report that advised its clients to short sell the Turkish lira.
MSCI, the provider of research-based indexes and analytics, warned last month that it may relegate Turkey from emerging market status to frontier-market status because of bans on short selling and stock lending.
With the market becoming less transparent, overseas fund managers, especially with short-term portfolios, are unenthusiastic about the Turkish market and are becoming more concerned about any forthcoming introduction of other liquidity restrictions.
The exodus of foreign capital is likely to undermine Turkey’s drive for economic growth, especially during the coronavirus pandemic when employment and investment levels have gone down, with the Turkish lira facing serious volatility.