Samsung Heavy Industries Completes Sale of Ningbo Production Facility
South Korean shipbuilder Samsung Heavy Industries has completed the sale of the second of its three production facilities located in China. The company announced in 2021 that it intended to close its operation in Ningbo, China after 25 years following a similar pattern to other South Korean companies that have also been withdrawing from China.
The South Korean companies had established offshore production facilities seeking to take advantage of lower operating costs in China. Samsung started the Ningbo facility in 1997 to build large ship blocks that were sent to the Geoje shipyard in South Korea for assembly. The company said in 2021 that the plant was antiquated and would require significant upgrades. In addition, rising coasts have reportedly eroded the advantages of the operation.
Despite capacity issues at its yards in Korea and a strong orderbook, Samsung has been incurring financial losses in its component production operation leading to the announcement that they planned to close the Ningbo facility. According to the reports, production was stopped at the Ningbo yard during the first half of this year.
Korean media is reporting that the company completed the sale of the Ningo facility including the land to the Chinese government. It is the second Chinese facility Samsing has sold since announcing its intentions to reduce overseas operations. Late last year they sold a facility that had been started in 2008 also in China. According to the reports, that facility had been incurring financial losses for the past decade.
Samsung’s efforts to reduce its Chinese operations follow a similar pattern to other large Korean companies that have also been selling their Chinese interests. Hyundai Steel had been making sheet steel in China for the Hyundai and Kia automotive factories. They are reportedly currently in due diligence with buyers for the facilities. Both POSCO and Dongkuk Steel also have sold their Chinese production operations.
Samsung Heavy Industries retains one production facility located in Rongcheng as its shipbuilding base in China. The company reports it invested $500 million in the facility which opened in 2007. The following year, SHI said that it had an annual production capacity of 500,000 tons at the yard which is located adjacent to the Longyan Port and Shidao Port. The main business scope of the facility is manufacturing large-scale blocks and land and offshore structures. The yard can produce GIGA/MEGA blocks of 8,000 tons and above. The speculation is that SHI may close this facility in the future, although the company has not announced plans for its remaining operations in China.