The Tianjin facility in China was responsible for producing up to 15 per cent of the total handsets Samsung shipped to market last year

Samsung has announced that it intends to close its largest manufacturing plant in China, the Tianjin facility, following months of speculation. The world’s biggest smartphone producer announced the closure on Wednesday following increased production costs and a fall in sales in China. Last year Samsung produced 36 million smartphone handsets at its Tianjin facility, around 15 per cent of its total global production.

"As part of ongoing efforts to enhance efficiency in our production facilities, Samsung Electronics has arrived at the difficult decision to cease operations of Tianjin Samsung Electronics Telecommunication (TSTC),” Samsung told journalists at the South China Morning Post.

“Samsung is extremely grateful for the devoted support of our employees and we are committed to providing a fair and reasonable compensation package that includes career counselling and vocational training while opportunities to transfer to other Samsung facilities will also be made available where possible," the company said.

Last year, Samsung shipped 317 million smartphone handsets to the global market, making it the world’s most prolific manufacturer. However, in 2018 it has seen its market share eroded by stiff competition from Chinese rival Huawei, who this year became the world’s second biggest producer.

Samsung’s decision to close the Tianjin facility in China will certainly hand the initiative to its regional rival, as Huawei looks to further erode Samsung’s market share.

"Next year, we will be very close to number one, maybe we will be on par with Samsung. And at least the year after, maybe we have a chance (to be number one), [by the end of] the year 2020," Richard Yu, the CEO of Huawei’s Consumer Division, told CNBC in a recent interview.

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