The Trump administration decided to suspend reciprocal tariffs for 90 days, giving Samsung Electronics time to adjust its global smartphone supply chain. However, the industry believes that it will be difficult for Samsung to change its current supply chain centered in Vietnam before the suspension of tariffs ends in July. This is due to many challenges that need to be addressed, including local capacity issues, workforce skill levels, and securing parts suppliers. Industry insiders believe that if Samsung cannot resolve the smartphone production supply chain issues during the tariff suspension period, it will inevitably impact the sales of the ultra-slim smartphone new product 'Galaxy S25 Edge,' which is expected to be released in the first half, and the foldable phone new product scheduled for release in the second half.
On the 10th (local time), the U.S. government announced that it would suspend national reciprocal tariffs for 90 days. Accordingly, reciprocal tariffs will be applied from July 10. The reciprocal tariffs announced by the Trump administration are expected to hit Samsung Electronics' smartphone business hard. This is because Vietnam, which accounts for more than half of Samsung's smartphone production, is subject to a high tariff rate of 46%. Samsung smartphones are produced with 30% of total output in India, while the remaining 20% comes from countries such as Korea, Brazil, Turkey, Indonesia, and China.
◇ Brazil and Turkey: Lowest tariffs applied, but capacity shortages
Looking at the reciprocal tariff rates on Samsung smartphone production countries announced by Trump, China is at 125%, Vietnam at 46%, Indonesia at 32%, India at 26%, Korea at 25%, Brazil at 10%, and Turkey at 10%. If Samsung adjusts its smartphone supply chain, it would be most advantageous to increase capacity in Brazil and Turkey.
However, Brazil and Turkey do not have sufficient local production capacity to divert for exports to the U.S. According to the industry, Turkey's annual smartphone capacity is estimated to be around 3 to 5 million units. Although premium phones are produced, most of the production is used for the domestic market, making it difficult to redirect to the U.S., according to industry consensus. In Brazil, while specific capacity figures have not been disclosed, it is known not to have a large production scale.
◇ The U.S. is a premium phone consumption market… Supply chain substitution is impossible
In India, which accounts for about 30% of Samsung's smartphone production, increasing production for exports to the U.S. is currently difficult. This is because production is focused on mid- to low-priced models for local sales, resulting in an absolute lack of capacity to switch to premium smartphones for the U.S. exports. Indonesia, China, and Brazil also have a high proportion of mid- to low-priced phone production.
According to Samsung Electronics, the company produced about 193 million smartphones last year. Of these, about 30 million units were shipped to North America. Excluding the quantities produced in Vietnam and India last year, approximately 38.6 million units were estimated to have been made in Korea, Turkey, Brazil, China, and Indonesia. China (125%) has a higher tariff rate than Vietnam (46%), and Indonesia (32%) is also subjected to high tariffs.
Professor Kim Yong-seok from Gachon University noted, "To manufacture premium smartphones, appropriate production facilities, skilled workforce, and a secured parts supply chain are necessary, but there is a time limitation in suddenly transforming existing mid- to low-priced phone-focused production bases into premium phone manufacturing facilities." He added, "The countries with relatively well-equipped premium phone manufacturing facilities are mostly Vietnam and Korea, which poses immediate limitations since Vietnam is blocked by high tariffs and Korea has a large domestic consumption of premium phones, which constrains its capacity."
◇ Concerns over poor sales for 'Galaxy S25 Edge' due to high tariffs
Industry sources reported that Samsung Electronics is preparing to produce the initial volume of the premium new product 'Galaxy S25 Edge' in Vietnam for release in the first half of the year. However, with production costs increasing due to the implementation of ultra-slim designs, along with the hurdles posed by the Trump administration's tariff burdens, adjustments to the smartphone production locations have become unavoidable. From July, when the reciprocal tariff exemption ends, a high 46% tariff will be applied to Vietnam, which will inevitably lead to an increase in the U.S. retail price of the Galaxy S25 Edge being produced thereafter. There are concerns that price hikes for the new products in the U.S. market could lead to poor sales. The new foldable phone models 'Galaxy Fold' and 'Flip', set to be released in the second half of the year, also face difficulties in adjusting production sites to countries other than Vietnam, making impacts unavoidable.
An industry insider said, "As far as I know, it is currently difficult for Samsung to announce production measures after July," adding, "Since each country is still engaged in behind-the-scenes negotiations with the U.S., we cannot say that reciprocal tariffs have been finalized, and due to the ever-changing policies of the Trump administration, it is also impossible to hastily adjust the supply chain (production countries)."