How To Do Business in Southeast Asia?
Samsung’s Global Workforce Reductions: A Strategic Response
Samsung Electronics, long a leader in the smartphone and semiconductor industries, has recently announced yet another round of global workforce cuts. While workforce reductions are not new to Samsung, the company’s decision to trim its staff underscores the gravity of the challenges it faces in retaining its dominance.
In May, Samsung faced a setback when its HBM3e chips failed initial tests by Nvidia, which would have seen them included in its AI processors. Though the problem has since been resolved, Samsung suffered another blow as its chips are now only featured in Nvidia’s H20 GPUs—a less sophisticated model of the H100 processor, designed specifically for China in light of U.S. export restrictions. Compounding these struggles, Samsung is facing mounting competition from Taiwan Semiconductor Manufacturing Company (TSMC), which recently secured key orders from South Korean AI chip developers over Samsung.
Falling Market Dominance in Southeast Asia
One of the most visible signs of Samsung’s struggles can be seen in its shrinking smartphone market share in key Southeast Asian countries. According to a recent report by market tracker Canalys, in terms of how Samsung do business in Southeast Asia. Samsung’s market share in Indonesia, the Philippines, Thailand, Vietnam, and Malaysia dropped to 18% in Q2 2024, down from 20% a year earlier. Xiaomi and Oppo, both Chinese competitors, are closing in on Samsung, each holding a 17% market share.
Despite Samsung shipping 4.4 million smartphones during the same period, it saw only a modest 5% year-on-year growth, compared to Xiaomi’s 37% and Oppo’s 24%. Across these individual markets, Samsung has failed to secure the top spot, with Xiaomi dominating in Indonesia and Malaysia, and Oppo leading in Thailand and Vietnam. These figures signal a clear threat to Samsung’s once-dominant position as the world’s largest smartphone maker.
Samsung’s Investment in Vietnam: A Glimmer of Hope?
Despite these setbacks, Samsung is not standing still. The company is making significant investments to bolster its manufacturing capabilities in Vietnam, where it plans to inject an additional US$1.8 billion into its OLED production facility. Located in Bac Ninh province, this plant will focus on manufacturing advanced organic light-emitting diode (OLED) displays for use in automobiles and cutting-edge technology equipment. With this move, Samsung aims to solidify its foothold in the OLED market, leveraging Vietnam’s growing role as a manufacturing hub. This investment will raise Samsung’s total capital in Bac Ninh to US$8.3 billion, reflecting its long-term commitment to maintaining a competitive edge in global display technology.
Intel’s Cost-Cutting Measures and Strategic Restructuring
Meanwhile, Intel, another tech heavyweight, is facing its own set of challenges. The company has recently unveiled plans to implement a cost-cutting strategy, targeting $10 billion in reductions to improve efficiency and competitiveness. This move follows Intel’s disappointing second-quarter 2024 financial performance, where the company acknowledged the need for decisive actions to enhance capital efficiency and regain market leadership.
Intel CEO Pat Gelsinger has led the charge with the company’s IDM 2.0 transformation—a major restructuring effort aimed at separating Intel’s design and manufacturing businesses. By implementing a clear division between these units, Intel aims to maintain client trust and prevent technology leaks while increasing operational transparency.
One of the most significant components of Intel’s restructuring is the potential sale of Altera, its programmable chip unit. Gelsinger and Intel’s top executives are expected to present these asset-shedding plans at the company’s upcoming board meeting. While no formal proposal has yet been made to sell Intel’s foundry business to TSMC, these measures underscore Intel’s commitment to streamlining its operations and focusing on core competencies.
Addressing Market Competition and Future Prospects
Like Samsung, Intel is facing intensifying competition from TSMC, particularly in the race to dominate the semiconductor market. Intel’s Q2 2024 results revealed that its efforts to regain leadership in process technology have been slower than expected. However, the launch of Intel 18A next year is anticipated to play a crucial role in restoring its competitive position.
Intel has already made strides to simplify its sales and marketing programs, with a projected 35% reduction in costs for its Sales and Marketing Group (SMG). These internal adjustments are aimed at improving decision-making speed and return on investment while aligning with Intel’s broader goal of boosting overall profitability.
Source: Asia Nikkei, Data Center Dynamics, The Nation Thailand, Vietnam Briefing, The Reauters, Intel Company, The Wall Street Journal, The Channel Co.
Three Key-Lessons Learnt from Samsung & Intel
- Adaptation to Market Challenges is Crucial: Both Samsung and Intel illustrate the importance of agility in responding to market pressures. Samsung’s workforce reductions highlight the need to realign resources in the face of declining market share and increasing competition, particularly from companies like TSMC and Xiaomi. Similarly, Intel’s $10 billion cost-cutting strategy shows that recognizing the necessity for efficiency and restructuring is vital for maintaining competitiveness and regaining market leadership.
- Investment in Emerging Markets Can Drive Growth: Samsung’s strategic investment of $1.8 billion in its OLED production facility in Vietnam demonstrates the potential for growth through targeted investments in emerging markets. This move not only strengthens Samsung’s manufacturing capabilities but also reflects a commitment to innovation and long-term competitiveness. Companies facing challenges in their core markets should consider diversifying and investing in regions or technologies that show promise for future growth.
- Restructuring for Clarity and Focus Enhances Operational Efficiency: Intel’s IDM 2.0 transformation emphasizes the need for clear operational divisions to enhance efficiency and accountability. By separating design and manufacturing functions, Intel aims to improve transparency and maintain client trust. This restructuring, coupled with a focus on core competencies, allows companies to streamline operations, reduce costs, and respond more effectively to market demands, providing a roadmap for other organizations facing similar challenges.
Final Thoughts
As Samsung and Intel continue to adapt to an increasingly competitive and rapidly evolving technology landscape, their strategic decisions—whether workforce cuts, investments in emerging markets, or operational restructuring—highlight the complexities they face. For Samsung, expanding OLED production in Vietnam could provide a much-needed boost, while Intel’s ambitious cost-cutting measures and product advancements may set the stage for a resurgence in market dominance. Both companies’ actions reflect broader trends within the tech industry, where innovation, efficiency, and strategic foresight will determine long-term success.
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