South Korean tech giants including Samsung Electronics and LG Electronics are moving their production lines to Vietnam in an attempt to cut down labor costs and to take advantage of tax benefit in the nation, according to market observers.
Last week, Samsung Electronics kicked off a groundbreaking ceremony for the construction on the Samsung CE Ho Chi Minh City Complex (SEHC) at the Saigon Hi-tech Park (SHTP). The complex mainly focusing on television assembly lines is set to open in the second half of next year.
Samsung is said to invest $560 million in the production lines in Vietnam, by gradually reducing the existing assembly line in Thailand.
The tech giant is hoping to see a synergy effect with other mobile and display plants located in the nation. Samsung is already running smartphone factories in two locations including Yen Phong District in Bac Ninh Province and Thai Nguyen. The module factory of Samsung Display is also slated to be operated by the second quarter this year.
Samsung Electronics’ rival LG Electronics is also expected to move its large television set production line from Thailand to Vietnam. It plans to build “Haiphong Campus” by integrating a factory producing televisions and smartphones located in Hung Yen with a plant for washing machines, vacuum and air-conditioners in Haiphong. It is set to invest around $1.5 billion in the complex.
“(LG Electronics) will concentrate its energy into the successful settling down of Haiphong Campus and strengthening the global competitive edge,” said Koo Bon-joon, chief of LG Electronics at the event in March.
Haiphong Campus will produce televisions, smartphones, washing machines, vacuum as well as in-vehicle infotainment in a bid to export to the global market.
Vietnam has many selling points for Korean tech companies. According to the Korea Trade-Investment Promotion Agency, minimum wages of Vietnam stands at around $90 to $120, less than half of $300, an average of Chinese labors. Also, Vietnam’s young labor force under 30 accounts for around 50 percent of total population. Plus, Vietnamese’ inclination to hard work and diligence are fascinating Korean companies.
“It is not easy to work together with if an inclination to work isn’t fit regardless of labor cost. In that sense, Vietnamese are welcomed for many Korean companies due to their diligence and hard work,” said an official from an electronics maker.
Tax benefits led by the Vietnamese government is another advantage. The government exempts high-tech companies from corporate tax for four years and 50 percent for the following nine years.
By Yeon Choul-woong
