Samsung is a South Korean multinational company that is engaged in a diversity of activities in such areas as construction, electronics, shipbuilding, medical services and various financial services. One of the renowned Samsung industrial subsidiaries includes Samsung Electronics, which engages in various aspects of information technology, Samsung Heavy Industries that engages in activities such as shipbuilding, and Samsung Engineering.
Samsung is outsourcing the production of its A5 processors to Austin in Texas. Samsung decided to take this step due to various economic benefits associated with a Texas based production facility. First, favorable real estate costs in Texas present minimal costs in setting up and operating a production facility (Fallon 1). Among other advantages are significantly low taxes and established hardware manufacturing industry in Texas.
Various economic factors justify Samsung’s decision to outsource the production of the A5 processor to Austin. Rent, taxes and availability of labor are the major considerations for any company involved in manufacturing. Minimized expenses on rent and taxes will allow Samsung to channel funds into more crucial stages of the processor production. Considerations on real estate and plant costs are crucial in mitigating costs associated with building maintenance, property taxes, and other operating costs.
The aspect of fewer regulations in Texas introduces benefits associated with the reduced production costs in less-regulated environments (Doh 700). Regulations highlight aspects such as a disposal of materials and work laws. In addition, the presence of a well-established hardware manufacturing industry will save Samsung the costs associated with the importation of skills and allow the company to enjoy lower labor costs. I cannot but agree that this will also positively affect particular aspects such as payroll taxes.
The interplay of various factors illustrate that costs associated with the relocation of Samsung’s A5 processors’ production facilities into Texas will introduce increased sales due to lower pricing emanating from low labor, operating and overhead costs.