And Vietnam's Largest Foreign Investor is...Samsung

♠ Posted by Emmanuel in ,, at 3/27/2015 01:30:00 AM
Making mobiles for the Man in Vietnam, AKA Samsung.
Unbeknownst to many, Vietnam has, in a number of respects, become the "Republic of Samsung." As labor costs in China have gone up as its development continues apace, it was inevitable that MNCs would move on to countries with relatively skilled workers and more competitive wages. Today's case in point is the Korean electronics behemoth Samsung. How reliant has Vietnam become on Samsung? The Nikkei Asia Review points out that Samsung subsidiaries are three of the four largest foreign investors in Korea; these subsidiaries account for about a fifth of all Vietnamese exports; and a slowdown in global smartphone sales could tip Vietnam into a trade deficit [!] If you're a Marxist, you'd say it's Korean imperialism:
[T]he Vietnamese economy has been growing more reliant on Samsung. In 2014, Samsung group companies ranked first, second and fourth in terms of new foreign direct investment projects in the country. In addition, Samsung accounts for nearly 20% of Vietnam's exports by value. The country could incur its first trade deficit in four years in 2015 if sales of Samsung smartphones slow.
Unsurprisingly, many Vietnamese are now wary of their government giving Samsung too many incentives to locate there, while other foreign investors are envious as well:
The biggest foreign direct investment project in Vietnam in 2014 was Samsung's $3 billion construction of its second plant in Thai Nguyen, according to the Foreign Investment Agency. The figure represents about half of total South Korean foreign direct investment in Vietnam last year.

As its dependence on Samsung increases, Vietnam is growing more dissatisfied with the company's local content ratio. Samsung procures some parts from Vietnamese suppliers, but as of last autumn, 80% of the components used in its products came from South Korean companies.

Critics say the Vietnamese government has done too much for Samsung, granting it tax exemptions [e.g., 10% instead of a 25% income tax] and reductions for more than 10 years and providing subsidies for employee education programs. An official at a Vietnamese financial institution said the government's preferential treatment of Samsung is so generous that it might seem unfair from the viewpoint of other companies.
Oh, and I forgot to add one more superlative: Samsung is also the largest foreign employer in Vietnam. What is very remarkable is that Samsung is ramping up its operations very quickly, having just put up its smart phone factory in 2009:
Samsung Electronics plans to hire 60,000 workers in Vietnam by July, bringing its number of local employees to around 100,000, more than any other foreign company.  The company currently has 84,000 workers on its payroll in the Southeast Asian country. The new employment plan, which takes into account attrition and retirement, comes as the electronics giant is looking to expand production and facilities at its plants in Bac Ninh and Thai Nguyen provinces in northern Vietnam.

Most of the new hires will be female factory workers, but Samsung is also looking to take on engineers, as well as recent graduates for possible executive-track positions. The company has already started recruiting extensively, and the first group of 2,500 additional workers is slated to join by the end of March. Samsung started production in Vietnam at its plant in Bac Ninh, east of Hanoi, in 2009. The plant currently produces smartphones, conventional mobile phones and parts for both, and the company plans to build new facilities for producing displays.
Like China before it, Vietnam offers the attraction of "market authoritarianism" to MNCs wary of labor disputes and other disruptions. So it's starting at a fairly low level with assembly work, but you have to begin somewhere. Still, the Vietnamese leadership is apparently gung-ho on Samsung. As labor costs in China inexorably rise, more will probably follow Samsung's lead in going to lower-cost locations. That is the way of modern manufacturing: it's just that Samsung has made major moves ahead of others being in a cutthroat, highly competitive global industry. Already, about half of its smart phones are made in Vietnam.

China, Samsung hardly knew ye.