By Khanh Vu and Phuong Nguyen

HANOI (Reuters) – Vietnam’s smartphone production and exports fell in November in the run up to Christmas sales season, according to official data, a new sign the country’s largest manufacturer, Samsung Electronics, is adapting to dwindling global demand.

The South Korean electronics giant has for years produced about half of its smartphones in Vietnam and accounts for nearly a fifth of the country’s overall exports.

The fall in output is in line with what industry and government sources as well as Samsung employees have told Reuters that the company had recently cut its smartphone production in Vietnam for a second time this year.

It is unclear if the cuts in Vietnam reflect Samsung’s general drop in production or a shift to other manufacturing countries.

Samsung, which has invested around $18 billion in six factories in Vietnam, with at least two of them focussed on smartphones, declined to comment.

The Southeast Asian country, a regional manufacturing powerhouse, reported a 9.3% decline in smartphone output to 20.6 million units in November from a year earlier, the General Statistics Office (GSO) said.

Smartphone output in the first 11 months of the year fell 6.1%. The GSO also said the value of Vietnam’s smartphone exports in November fell 1% on the month and 0.7% from a year earlier.

The wider category of consumer electronics manufacturing dropped nearly 20% on the year in November, GSO data showed, with monthly output slipping for the third straight month.

Most smartphones produced in the country are destined for Western markets, with output usually increasing in the weeks before Christmas. But expectations of lower consumer demand this year is pushing firms to limit production.

However, if demand remains sustained, the production cuts could exacerbate inflation in Europe and other importing regions.

SAMSUNG CUTS

Earlier this month, an industry source familiar with the matter said Samsung “has cut production significantly” once again after it scaled back its activities in Vietnam in the first half of the year amid the coronavirus pandemic.

A Vietnam government source confirmed Samsung cut production in the country twice this year, with the latest move likely to limit Vietnam’s contribution to the company’s global output of smartphones to 40% from the typical share of 50%.

Three company employees in Vietnam confirmed the cuts, with one noting workers were allowed to take seasonal leaves despite the approaching Christmas, in contrast with previous years.

As the country faces headwinds from a global slowdown, its overall exports in November fell 8.4% from a year earlier to $29.18 billion, according to the GSO.

Imports also fell by 7.3%, signalling possible further production cuts because components and materials used for exported products are often imported for assembly in Vietnam.