Samsung Electronics Co built the world’s largest smartphone business by tapping China’s cheap and abundant workforce, but is now shifting output to Vietnam to secure even lower wages and defend profit margins as growth in sales of high-end handsets slows.
By the time a new US$2 billion plant reaches full production in 2015, China’s communist neighbor will be making more than 40 percent of the phones that generate the majority of Samsung’s operating profit.
The Suwon, South Korea-based company’s second handset factory in Vietnam is due to begin operations in February, according to a Nov. 22 statement posted on the Web site of the local government where the plant is located.
“The trend of companies shifting to Vietnam from China will likely accelerate for at least two to three years, largely because of China’s higher labor costs,” said Lee Jung-soon, who leads a business incubation team of the Korea Trade-Investment Promotion Agency in Ho Chi Minh City. “Vietnam is really aggressive in fostering industries now.”
Hanoi has approved US$13.8 billion of new foreign projects this year through Nov. 20, a 73 percent increase on a year earlier, according to the General Statistics Office in Hanoi. Of this, South Korea led with US$3.66 billion.
Intel Corp, the world’s largest chipmaker, opened a US$1 billion assembly and testing plant in Ho Chi Minh City in 2010. Nokia Oyj said its facility near Hanoi producing Asha smartphones and feature handsets became fully operational in the third quarter.
LG Electronics Inc is building a new 400,000m2 complex to make televisions and appliances as part of a US$1.5 billion investment plan.
“The country is politically stable and has a young, increasingly well-educated workforce,” LG said in an e-mailed statement. “Like [South] Korea, Vietnam understands what it takes to rebuild an economy after a devastating war.”
Samsung’s new plant is expected to make 120 million handsets a year by 2015, said two people familiar with the company’s plans, who asked not to be identified because the matter is private. That would double the current output from the country and compares with the 400 million global total Samsung shipped last year.
With about one-third of the global smartphone market, Samsung may eventually produce as many as 80 percent of its handsets in Vietnam, said Lee Seung-woo, an analyst at IBK Securities Co in Seoul who has been tracking the company for more than a decade.
“The handset business is all about assembling well-sourced components,” Lee Seung-woo said. “The most important thing is manpower.”
After setting up in China in 1992, Samsung now has 13 manufacturing sites and seven research laboratories there, according to its June sustainability report. The 45,660 employees in China make up more than 19 percent of Samsung’s global workforce, the largest source of labor outside South Korea, it said.
Record economic growth that made China the second-biggest economy has fueled wage inflation, pricing many workers out of low-end jobs. The base monthly salary for a factory worker in Beijing was US$466 last year, compared with US$145 in Hanoi, according to a survey of pay conducted by the Japan External Trade Organization.
“The rule of the game is now changing to how much market share you can win over rivals,” LIG Investment & Securities Co analyst Hong Sung-ho said from Seoul. “Many companies are now scratching their heads to figure out how to cut manufacturing costs.”
Samsung’s complex in the Yen Binh Industrial Zone of Thai Nguyen Province, north of Hanoi, will pay no tax for the first four years and half the full rate the following 12 years, the local government’s Web site shows.
While tax breaks and cheap workers are lures that other countries such as India and Indonesia could offer, Vietnam’s closer location to existing Samsung production bases in China and South Korea is an extra incentive, said Than Trong Phuc, managing director of technology-focused investment fund DFJ VinaCapital LP in Ho Chi Minh City.
“Other countries can match or even beat the incentives that Vietnam is offering, but Vietnam is very close to Samsung’s supply chain,” Phuc said. “You see [South] Korean companies everywhere you look in Vietnam, right and left.”
Sweeping policy changes under US Secretary of Health and Human Services Robert F. Kennedy Jr are having a chilling effect on vaccine makers as anti-vaccine rhetoric has turned into concrete changes in inoculation schedules and recommendations, investors and executives said. The administration of US President Donald Trump has in the past year upended vaccine recommendations, with the country last month ending its longstanding guidance that all children receive inoculations against flu, hepatitis A and other diseases. The unprecedented changes have led to diminished vaccine usage, hurt the investment case for some biotechs, and created a drag that would likely dent revenues and
Global semiconductor stocks advanced yesterday, as comments by Nvidia Corp chief executive officer Jensen Huang (黃仁勳) at Davos, Switzerland, helped reinforce investor enthusiasm for artificial intelligence (AI). Samsung Electronics Co gained as much as 5 percent to an all-time high, helping drive South Korea’s benchmark KOSPI above 5,000 for the first time. That came after the Philadelphia Semiconductor Index rose more than 3 percent to a fresh record on Wednesday, with a boost from Nvidia. The gains came amid broad risk-on trade after US President Donald Trump withdrew his threat of tariffs on some European nations over backing for Greenland. Huang further
CULPRITS: Factors that affected the slip included falling global crude oil prices, wait-and-see consumer attitudes due to US tariffs and a different Lunar New Year holiday schedule Taiwan’s retail sales ended a nine-year growth streak last year, slipping 0.2 percent from a year earlier as uncertainty over US tariff policies affected demand for durable goods, data released on Friday by the Ministry of Economic Affairs showed. Last year’s retail sales totaled NT$4.84 trillion (US$153.27 billion), down about NT$9.5 billion, or 0.2 percent, from 2024. Despite the decline, the figure was still the second-highest annual sales total on record. Ministry statistics department deputy head Chen Yu-fang (陳玉芳) said sales of cars, motorcycles and related products, which accounted for 17.4 percent of total retail rales last year, fell NT$68.1 billion, or
Macronix International Co (旺宏), the world’s biggest NOR flash memory supplier, yesterday said it would spend NT$22 billion (US$699.1 million) on capacity expansion this year to increase its production of mid-to-low-density memory chips as the world’s major memorychip suppliers are phasing out the market. The company said its planned capital expenditures are about 11 times higher than the NT$1.8 billion it spent on new facilities and equipment last year. A majority of this year’s outlay would be allocated to step up capacity of multi-level cell (MLC) NAND flash memory chips, which are used in embedded multimedia cards (eMMC), a managed
RSS