Samsung hailed as partner to the nation

At the plant in Thai Nguyen, operators are trained to operate state-of-the-art equipment
and maintain peerless quality control standards

Sitting on a bus running along the newly-built highway between Hanoi and Thai Nguyen province, the roadside pastoral sights could be almost anywhere in rural Vietnam. Alongside the highway there are large rice fields peppered here and there with buffalos munching grass. But here, 40 kilometres from Hanoi to Thai Nguyen, stands a giant industrial complex surrounded by housing and small shops.

Like much of the landscape on either side of the highway, three years ago this site used to be rice fields tended by farmers in Hong Tien commune, Pho Yen district, Thai Nguyen. However, now the site is home to the world’s largest mobile phone maker, and Samsung Electronics may even increase production.

Samsung Electronics decided to build its largest manufacturing complex here in March 2013. Currently its largest factory starts manufacturing the newest full-metal body smartphones series for the new trend of Samsung design. From here, smartphones are exported throughout the world.

Samsung Electronics has already committed to invest $6.2 billion into this 170-hectare site. A part of the complex started production in March last year, just a year after construction began. Now, more than 35,000 operators work in the factory making smartphones, including the Galaxy Note 4 and Galaxy tablets. Every month, the site recruits around 1,500 staffs until it reaches its target of 100,000 operators.

Samsung Electronics’ project has significantly changed the lives of people living in the vicinity. Besides creating tens of thousands of jobs directly for young people in the north, it encourages the development of services in surrounding areas.

More importantly, it makes Thai Nguyen one of the country’s most attractive investment locations, as company suppliers follow Samsung to build factories there that supply components and parts to this mega manufacturing complex.

Since Samsung started the construction of the complex in March 2013, foreign investors have registered to invest in 43 projects in the province, worth around $6.9 billion, according to the Foreign Investment Agency. This number is very significant given that only 32 foreign direct investment projects were licensed in Thai Nguyen over the proceeding 25 years, from 1987 to 2012.

Samsung’s contribution to the province has received the support of Thai Nguyen’s leaders. Last year, the People’s Council decided to provide additional incentives to Samsung, even though the company has already received preferential incentives under the High Technology Law, Investment Law, and Law on Corporate Income Tax. The company was offered a 50 per cent exemption on their corporate income tax payments for additional three years, once their tax exemption limit expires under the Law on Corporate Income Tax. This incentive will be funded by the provincial budget.

Thai Nguyen is not alone in offering strong support to Samsung. Its neighbour, Bac Ninh province has also provided similar support, as Samsung has also committed to invest at least $3.5 billion in Bac Ninh. Ho Chi Minh City has also recently decided to spend nearly $47 million developing infrastructure to serve the $1.4 billion Samsung CE Complex in Saigon Hi-tech Park.

Samsung’s colourful housing complex for operators has helped create a vibrant working
atmosphere for its employees - Photos: Ngoc Linh

Company-to-country partnership

The investment expansion of Samsung started in 2007, when the first $670 million electronics factory was built in Bac Ninh province. Over the past seven years, Samsung committed to invest $11.2 billion in Vietnam, becoming the largest foreign investor in terms of committed investment in the country.

Most importantly, Samsung has invested in hi-tech industry, a sector the Vietnamese government is keen to encourage. Unlike many foreign investors who made investment promises but were slow in the deployment, Samsung immediately implemented its investment plans. A good example in this case is the construction of Thai Nguyen complex.

Samsung has even more ambitious plans in Vietnam. In 2013, it signed a memorandum of understanding with the Ministry of Planning and Investment (MPI) for expanding investment into other industries including infrastructure, property, shipbuilding and telecommunications. According to the MPI, Samsung will increase total investments in Vietnam to $20 billion within the next three years.

Samsung’s positive and dynamic approach to investment goes some way to explaining the warmth the company receives, with the government going so far as to establish a special taskforce to monitor and aid in any issues Samsung has difficulties in.

“Samsung is not simply an investor, it is a partner of Vietnam,” said Tran Dinh Thien, director of the Vietnam Economic Institute.

He added that Vietnam needed more firms like Samsung to boost economic growth, as domestic industrial companies remained small in scale.

“When you successfully attract such huge investments from a multinational company like Samsung, many other foreign investors will look at Vietnam and follow suit,” said Professor Nguyen Mai, head of Vietnam Association of Foreign Invested Enterprises.

“It deserves preferential incentives because it is a real partner for our industrialisation process,” said Mai.

Indeed, the contribution of Samsung has not stopped at investment capital, tax payments, and job creation. It has highlighted Vietnam as a point on the global electronic supply chain. Since Samsung invested in the country, Vietnam has emerged as one of the largest electronics exporters in the world. Last year, Samsung’s export revenue in Vietnam reached $26 billion, accounting for 18 per cent of the nation’s entire export revenue. One third of Samsung’s mobile phones worldwide are now made in Vietnam.

Through a research and development centre in Hanoi, and more to come in Bac Ninh, Thai Nguyen and Ho Chi Minh City in the future, the company also plays an important role in training the workforce and increasing the added-value of made-in-Vietnam Samsung products. Beginning operations in 2010 with 349 engineers, the centre has recruited 1,166 engineers as of the end of last year, and will employ 2,000 more engineers in 2016.

Providing a healthy menu for its staff is a priority for Samsung

Spillover effect

In June 2014, Laird Technologies, a global technology company headquartered in the UK, opened its first manufacturing factory in Vietnam in order to expand its international reach and proximity to key Asian markets.

The new factory, located in Bac Ninh province, will allow the company to better serve manufacturers of smart phones, portable electronics, and other devices. This development indicates that Vietnam is emerging as a new global base for electronic manufacturing.

According to the company, the facility will predominantly manufacture precision metals and electronic materials for Laird’s Performance Materials Division, which designs and supplies electromagnetic interference shielding, thermal management solutions, and signal integrity products for smart phone, transportation, telecoms, medical, and consumer industries worldwide.

Early last month, South Korea’s Innowave Co., Ltd. received an investment certificate to build a factory in Vinh Phuc province. According to Innowave, the plant will manufacture components to supply both Samsung factories in Thai Nguyen and Bac Ninh.

Laird Technologies and Innowave are just two among dozens of companies investing in Vietnam to meet Samsung’s demand for components and parts.

Lee Cheol Ku, deputy general director of Samsung Electronics Vietnam Thai Nguyen, said 156 suppliers were working with the Thai Nguyen complex, of which 71 suppliers are situated in Vietnam. This number will increase in the future, as the complex goes into full operation.

Although just a few Vietnamese companies have signed contracts supplying electronics components and parts to Samsung in Vietnam, the investment of this electronics giant is encouraging local companies to be more innovative and competitive to join Samsung’s supply chain.

Nguyen Van Dao, deputy director of Samsung Vina Electronics, said Samsung wanted Vietnamese companies to join its supply chain, but local companies had to meet all criteria required by Samsung Electronics.

In September, Samsung hosted a support industry conference in Hanoi to introduce the criteria required to become a Samsung supplier. “We showed what we want, and the response from local companies has been very positive,” said Dao.

At present, 15 local companies have registered to become suppliers for Samsung CE Complex in Ho Chi Minh City – evidence of the spillover effect of Samsung within the economy.

Other industries have also benefitted from Samsung’s investments, the logistics sector being chief among them.

Responding to shippers’ demand for additional air freight space, Europe’s biggest all-cargo airline Cargolux last December expanded its cargo services to Vietnam with the introduction of a second weekly flight to Ho Chi Minh City and four flights a week to Hanoi. According to the air cargo specialist, it foresees an increase in electronic shipments as Vietnam boosts its exports by air, mainly from Samsung.

The world’s leading cross-border express services provider DHL and Etihad Cargo – a subsidiary of United Arab Emirates’ national airline Etihad Airways – in 2014 also expanded services to Hanoi to serve the increasing exports of the electronics giant.

Operators enjoy a stroll in the sunshine on their lunch break

Solid commitment

Although Samsung is facing a drop in profits in the global market, it remains committed to pursuing its investment plans in Vietnam.

Han Myoung Sup, executive vice president of Samsung Electronics and also the newly-appointed president of global strategy and operations for Vietnam, in a recent interview with VIR said that Samsung had no intentions of changing its investment plans.

Furthermore, he said Vietnam would be a production base helping the company to enhance competitiveness. Han’s words were underlined by the $3 billion investment plan to construct a factory in Thai Nguyen that will manufacture full-metal body smartphones.

“When deciding on an investment plan, we have to think about competitive factors to minimise production costs. Vietnam met our demands,” said Han, citing the available workforce, cheap labour costs, and improved investment climate.

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