Overseas factories, domestic employment, and technological hollowing out: a case study of Samsung’s mobile phone business

Abstract

Analysing the case of Samsung Electronics’ mobile phone business, this paper examines the effects of establishing factories abroad on domestic jobs and the issue of technological hollowing out. The offshoring of mobile phone assembly to China, India, Brazil and Vietnam did not result in a reduction of domestic jobs. On the contrary, Samsung’s domestic employment increased from 5960 persons in 2002 to 20,500 in 2012. This increase mainly reflects a net increase in high-paying jobs (R&D, engineering, design, marketing) while the number of low-paying jobs (assembly) remained stagnant. To cope with possible technological hollowing out, Samsung kept its core engineers/technicians in a special unit, instead of firing them, whenever domestic assembly lines were reduced or foreign lines were established. They were kept inside the so-called “global manufacturing technology center,” with the number of its employees increasing from 80 in 2006 to more than 1103 in 2011. These employees visit overseas factories to conduct activities such as maintenance, monitoring, re-modeling of assembly lines, and automation. In terms of strategy, Samsung engages in offshoring, but not outsourcing. This is in contrast to Apple which does both offshoring and outsourcing by contracting with Foxconn.