Nam Hyun-woo has worked as a staff writer at The Korea Times since 2013, mostly covering business and politics. He currently belongs to the Business Desk where he covers topics such as emerging tech, AI, ICT and Korea's chaebol community. Prior to joining the team, he was the paper's correspondent for the presidential office of Korea during the Yoon Suk Yeol and Moon Jae-in administrations.
US tariffs to test resilience of Samsung Electronics
Samsung Electronics officials test a Galaxy S25 smartphone during a showcase event in San Jose, Calif., Jan. 22. Courtesy of Samsung Electronics
By Nam Hyun-woo
The tariff pressures from the Donald Trump administration are testing the resilience of Samsung Electronics' supply chain across its various business segments.
Given the anticipated impact of tariffs on its global manufacturing operations, Samsung faces several evolving scenarios across its smartphone, semiconductor and home appliance businesses. As a result, it is becoming increasingly crucial for the company to reassess and realign its manufacturing strategy.
Among the company’s businesses, its smartphone division is feared to suffer the greatest impact as a consequence of the tariffs.
Currently, it is estimated that around half of Samsung’s Galaxy smartphones are produced in Vietnam, with approximately 30 percent manufactured in India. The rest are produced in facilities in Brazil, Korea and Indonesia.
Trump last week announced sweeping “reciprocal” tariffs on U.S. trading partners, imposing 46 percent for Vietnam. The tariffs mostly targeted Asian nations, levying 26 percent for India, 25 percent for Korea and 32 percent for Indonesia.
This could lead to a price increase of up to 46 percent for Galaxy smartphones in the U.S. if Samsung decides to pass the additional costs onto consumers.
Initially, it was assumed that the impact on the price competitiveness of Galaxy smartphones against Apple’s iPhone series would be limited, as Apple was also expected to face a similar cost increase.
Currently, Foxconn’s plant in Zhengzhou, China, is believed to produce around 80 percent of Apple’s iPhones. Since China was hit with a 54 percent duty under Trump’s new tariff policy, Reuters reported that iPhone prices could rise by 30 percent to 40 percent.
Due to this, industry officials here are now expressing concerns that the U.S. may grant a tariff exemption for Apple products, giving the U.S. tech giant a competitive edge.
“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,” an IT industry official said.
In 2019, Trump partially approved Apple’s request for tariff exemptions on Chinese-made components, following Apple’s pledge to expand manufacturing in the U.S., including its MacPro production.
“One of the most viable and immediate options for Samsung’s mobile division is to rebalance its regional manufacturing capacities and redirect shipping destinations,” the official said. “Since Brazil was hit with only a 10 percent tariff under the latest measure, the company could consider expanding output at its Brazil plant, while diverting products made in Vietnam to markets outside the U.S.”
A view of a Samsung Electronics' Vietnam factory in the province of Bac Ninh, Thursday / Reuters-Yonhap
Tariffs are also impacting Samsung’s home appliance manufacturing strategy. While Samsung Electronics produces most U.S.-bound TVs, refrigerators, washers, dryers and other appliances in Mexico and the U.S., a portion is also manufactured at other production bases, such as its plant in Vietnam.
Since the U.S. maintained a zero percent tariff on goods compliant with the United States-Mexico-Canada Agreement (USMCA), the company can cope with the tariff measures by expanding production capacity at its Mexican plants. However, it remains uncertain whether the U.S. will continue this policy in the future, and the company is reportedly considering increasing production at its U.S. plants.
Facing the greatest uncertainty are chips.
Semiconductors were exempted from last week’s tariff measures because Trump is planning separate tariffs on chips. In February, he threatened to impose over 25 percent tariffs on chips manufactured outside the U.S.
Chips accounted for 7.5 percent of Korea’s direct exports to the U.S. last year, as they were mostly shipped to the U.S. after being assembled into finished devices in other countries, such as Taiwan and Vietnam.
“For example, 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 (even though the chip tariff has not yet been announced),” Hanwha Investment & Securities analyst Kim Kwang-jin said.
“As of last year, the U.S. accounted for approximately 36 percent of global AI server demand … If the costs incurred by the tariff is not passed on to consumers and suppliers shoulder the costs, it will inevitably lead to cost increases across the supply chain. The same logic applies to computers and smartphones as well.”