The South Korean electronics giant Samsung has announced that it is to cut its overseas production this year by up to 40 per cent because of the worsening economic crisis in Asia.

The move will affect Samsung operations in Thailand, Malaysia, Indonesia and Vietnam.

The company says it will try to achieve the restructuring without any lay-offs at its overseas plants.

Samsung spokesman Shin Jhe Kim said the company's factories in south-east Asia were experiencing difficulties because local markets had shrunk.

"Therefore, we will reduce our production (in these countries) shortly and we will increase production from Korea instead," he said.

Expansion at an end

Samsung, one of the world's largest producers of microchips, has more factories in south-east Asia than in other regions of the world.

Many Korean companies pursued an aggressive expansion policy in south-east Asia in the first half of the 1990s, driven by lower labour and production costs in the region.

However, south-east Asian economies are now in trouble.

In addition, the devaluation of the South Korea currency, the won, because of the on-going economic turmoil has made production at home more competitive.

Retrenchment across the world

The decision to cut back production in south-east Asia follows an announcement last month, shelving plans for a £450m investment in Britain.

In November, Samsung announced deep cuts in its 1998 investments. The cuts form part of a restructuring programme tied to an International Monetary Fund rescue package for South Korea's reeling economy.

Samsung has said it will cut worldwide investment by at least 30 per cent to six trillion won ($5.45bn), down from 8.2 trillion won in 1997.

Some observers believe excessive borrowing by big business in South Korea helped fuel the country's economic crisis.

Samsung's restructuring is likely to be one of many similar moves as the stronger companies in South Korea try to protect their core businesses in order to survive.
 

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