A Saumsung smartphone customer service center in Hohhot, North China's Inner Mongolia Autonomous Region in October. Photo: Xinhua

Samsung Electronics and China's internet search provider Baidu announced on Wednesday that Baidu's first cloud-to-edge artificial intelligence (AI) chip, Baidu KUNLUN, has completed its development and will be mass-produced early next year, according to a statement Baidu sent to the Global Times on Wednesday. 

Industry insiders said the move shows that, Samsung, despite its smartphone business slowdown in China, is unlikely to give up the massive Chinese market. The company is pinning its hopes on a shift upward toward high-end industries such as AI chips, 5G and smart home devices to win back the hearts of Chinese businesses and fill gaps left by US suppliers, insiders said.

"Samsung's cooperation with Baidu is a key move to stabilize its market in China," Ma Jihua, a veteran industry analyst, told the Global Times on Wednesday.

He noted the two companies could cooperate on smart devices and autonomous driving in the future, because the design and production capabilities of Samsung, combined with Baidu's rich channel resources and mature understanding of the Chinese market, will help Samsung stay at tuned to the current needs of the Chinese market in the 5G era. 

The move also refutes claims that Samsung is leaving China completely, after it shut down smartphone factories amid business downward pressure. 

"Samsung will not give up the Chinese smartphone market. It is an opportunity for smartphone makers to reshuffle the Chinese smartphone industry when 5G arrives," a Samsung employee who wished to remain anonymous told the Global Times on Wednesday.

High-end manufacturing components in smartphones, power cells, and semiconductor production will dominate manufacturing in China in the future, as China remains the largest market for those components and it is also in line with the country's ambition to develop high-end components in the manufacturing industry, the employee said. 

According to the Yonhap News Agency, Samsung Electro-Mechanics Co shut down a Chinese unit that made high-density interconnect substrates in Kunshan, East China's Jiangsu Province, due to low profitability. 

Workers dismissed from the Kunshan factory confirmed on Wednesday that the plant will halt production on December 24, and most of those being laid off would get a compensation package of "N+5" months of salary per person (N refers to the years of work), thepaper.cn reported. 

The move came after a cut in production at the Huizhou plant in South China's Guangdong Province in October. Two other Samsung factories shut down in North China's Tianjin and South China's Shenzhen last year. 

Samsung Electronics said in a statement that the latest downsizing was part of its normal business strategy to enhance its competitiveness in the Chinese market. 

Due to stiff competition in the smartphone industry in China, Samsung accounted for only about 1 percent of the market in the first quarter this year, Counterpoint Research found. 

The South Korean company is aiming to make inroads into high-end industries in China amid the 18-month-long China-US trade war, which could potentially cut off US chip and component supplies to Chinese vendors. 

According to a recent report by the Xi'an Evening News, Samsung will increase its investment in a chip plant in Xi'an, capital of Northwest China's Shaanxi Province, by $8 billion. Once the second-phase project is finished, the plant will produce 130,000 flash memory chips per month with a production value of 30 billion yuan ($4.29 billion).

Ma noted Samsung's changing market configuration in China will shift its research and development work, and its core manufacturing business will be transferred to China, while the low-end production work will go outside China.
Newspaper headline: Samsung, Baidu make AI chips