Samsung Electronics flatly denied a subcontractor's claim that it suffered damages because "the company unfairly cut consigned volumes." Company A says Samsung Electronics engaged in "gapjil," or abuse of power, by demanding a factory transfer as it pursued a fifth-generation (5G) mobile network project in the United States and then unilaterally reducing contract volumes. The Korea Fair Trade Commission received Company A's complaint and the matter is under investigation to determine the facts and whether any violations occurred. Company A is a U.S. corporation established by a small Korean cable supplier.
Samsung Electronics issued a statement on the 4th and fully refuted Company A's filing. A Samsung Electronics official said, "We made every effort to comply with laws and to pursue co-prosperity with partners, and there was no violation of the law," adding, "There was no instance of forcing a factory transfer in the transaction with Company A."
Samsung Electronics also said, "Because we purchase cables from a variety of companies, there was absolutely no need to force Company A to transfer its factory," adding, "Company A claims it increased investment in a U.S. plant at Samsung Electronics' request, but Samsung Electronics never asked Company A to make facility investments." The company said, "Before signing the contract, we conducted evaluations based on quality standards, and Company A independently decided to invest to upgrade its plant."
Responding to Company A's claim of an "unfair cancellation of consignment," the company said, "The decline in order volume was solely because there were no orders from the client," adding, "We also completed payment for the entirety of the placed volumes."
In 2019, Company A was approved by Samsung Electronics as a primary cable supplier for communications equipment used in the U.S. 5G project and then signed a subcontract. In early 2021, Company A transferred its factory from Irvine, California, to Dallas, Texas, where a logistics warehouse of a Samsung Electronics subsidiary is located. The company says the factory transfer followed Samsung Electronics' criticism that "the lead time, including shipping, is too long." Company A claims that even so, Samsung Electronics reduced orders midstream, saying Verizon Communications Inc. had changed the type of cable used in its 5G equipment, which led the U.S. unit to go bankrupt; it then filed for dispute mediation with the Korea Fair Trade Mediation Agency under the Korea Fair Trade Commission (FTC).