The fallout from Samsung Electronics Co’s dramatic move to end production of its Galaxy Note 7 smartphone is set to spread to Vietnam, hurting an economy already hit by drought and lower oil prices.
“Samsung’s decision to kill off Galaxy Note 7 will certainly impact Vietnam’s exports this year,” since the company’s exports represent about 20 percent of the nation’s shipments, said Nguyen Mai, chairman of Vietnam’s Association of Foreign Invested Enterprises.
The recall of 2.5 million smartphones after complaints of exploding batteries contributed to a US$1.1 billion decline in exports last month, Vietnam’s General Statistics Office said.
Samsung helped to turn Vietnam into an electronics manufacturing hub almost single-handedly with US$15 billion in investments from the technology giant and its affiliates, including battery-maker Samsung SDI Co.
The South Korean company is Vietnam’s biggest exporter, shipping about US$33 billion of electronics last year.
Vietnam now faces the loss of millions of US dollars in exports at a time when its struggling to meet its economic growth target of 6.7 percent for this year.
Part of the reason for the 6.8 percent decline in exports last month from the previous month was due to the Note 7 recall, statistics office head Nguyen Bich Lam said.
“It’s another blow,” said Alan Pham, the Ho Chi Minh City-based chief economist at VinaCapital Group Ltd, the country’s largest fund manager.
“This is the risk of putting all your bets on one company or industry, but that is the natural progression of a developing country: It starts by exporting commodities then turns to manufactured products, industrial products,” he said.
Even before the Note 7 fallout, Vietnam was struggling to meet its target of 10 percent export growth this year, Vietnamese Trade and Industry Minister Tran Tuan Anh said in a July interview.
Still, Vietnam’s economic growth is better than neighboring countries, Pham said.
Vietnam’s annual economic growth accelerated to 6.4 percent last quarter, from 5.78 percent in the previous three months, the Vietnamese General Statistics Office said on Sept. 29, behind only the Philippines in Southeast Asia. The government is pushing for 6.7 percent growth target this year.
Earlier this month local news Web sites reported that Samsung had applied to the customs department for tax exemptions to re-import flawed Galaxy Note 7 smartphones and export replacements to Samsung’s headquarters in South Korea.
The company declined to comment on ending production of the Note 7.
“Samsung told me earlier this month that they have no lay-off plans for now as smartphones are just a part of their production portfolio,” said Mai, who estimated the total workforce tied to Samsung in Vietnam is about 400,000 people, including 130,000 direct workers.
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