Vietnam’s Cheap Labor Encourages Samsung to Invest in New Electronics Plant
In its latest effort to capitalize on Vietnam’s cheap labor costs, Samsung Electronics Co. said Thursday it will invest $560 million to build a new plant in the country to make TVs and other home appliances.
The new factory will be built in a high-tech park in Ho Chi Minh City.
“The complex will be used for addressing mid- to long-term demand for consumer electronics globally, including emerging markets,” the South Korean company said in a statement.
Samsung, the world’s biggest maker of TVs, smartphones and memory-chips, has two major mobile-phone production facilities in Vietnam, an increasingly important manufacturing base for electronics companies.
In July, Samsung received approval from Vietnamese authorities to spend $1 billion on a factory for displays used in smartphones and tablets. Samsung Display Co., 85%-owned by Samsung Electronics, said the plant will make display modules for both high- and low-end devices. The factory is due to start operations next year.
“We greatly appreciate investment from South Korea in general and from Samsung in particular. South Korea has been among the largest source of foreign direct investment in Vietnam,” Mr. Sinh told The Wall Street Journal.Cao Viet Sinh, a senior government adviser and former deputy minister of planning and investment, estimates that Samsung’s exports from its Vietnamese factories will total $20 billion this year. Samsung doesn’t provide data on its exports from individual countries.
Samsung’s move to expand its production operations in Vietnam comes as the country is undergoing a swift economic transition. Exports of smartphones and computer parts have surpassed crude oil and garments as the country’s largest export earners.
Despite being the biggest maker of TVs, Samsung’s consumer electronics business has long stopped being a growth driver for the South Korean tech giant. In a bid to stoke fresh demand, the company has recently been adopting curved designs to its super-large, high-definition TVs, which it says improves the viewing experience.
In the second quarter, Samsung’s consumer electronics unit—comprised mainly of its TV business—accounted for 11% of the company’s total operating profit. The business is dwarfed by its mobile unit, which accounted for 61% of the company’s total operating profit.
A number of other tech companies also have factories in Vietnam, including South Korea’s LG Electronics Inc. and chip maker Intel Corp, as they look to take advantage of the nation’s low-cost, well-educated workforce.
Exports of smartphones and electronics from Vietnam totaled $31.8 billion last year, accounting for 24% of total exports, and an increase of more than 50% from the previous year, according to government data.
Source: http://online.wsj.com/
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