Last year, according to IDC, 11.6 million smartphone units were shipped to Vietnam—a 57 per cent increase from 2013. In 2014, 41 per cent of all mobile phones shipped to Vietnam were smartphones and this year’s shipments to Vietnam are expected to surpass those of feature phones.
According to Reuters, during the first half of last year, Vietnam was Apple’s fastest-growing market in the world. However, Vietnam is not just a growing consumer market for mobile manufacturers; tech giants such as Microsoft, LG, and Samsung have also invested billions of dollars in manufacturing and assembly facilities in Vietnam.
Samsung Electronics’ investments in Vietnam so far
• US$2.5 billion in factories in the northern province of Bac Ninh (producing cellphones, smartphones, tablets, and vacuum cleaners)
• US$5 billion in a hi-tech assembly plant in the northern province of Thai Nguyen (in Yen Binh Industrial Park)
• US$1.4 billion in plant in Ho Chi Minh City.
Furthermore, Samsung Vietnam’s research center is located in Hanoi, making Vietnam an essential part of Samsung’s global supply chain. Today, about one out of three Samsung phones are made in Vietnam. But Samsung is also an integral part of Vietnam’s economy as its largest foreign investor; last year, Samsung products made up 18 per cent of Vietnam’s total export turnover.
Outreach to young Vietnamese innovators
Samsung’s efforts to reach out to young Vietnamese include workshops like the one held late last month in Hanoi. On April 22, several Vietnamese leaders of Samsung as well as former Vietnamese and South Korean ambassadors came together during an event at Hanoi’s University of Industry to share elements of success, future opportunities, and advice from their own careers with approximately 300 students.
One key takeaway from the workshop is that South Korea went from a war-torn economy to becoming a developed nation and economic powerhouse within several decades–and that Vietnam should follow a similar path. (During the 1960’s South Korea was considered among the poorest countries in the world.) Indeed, Samsung’s US$11 billion investment in high technology (and in human capital) in Vietnam will be one of the keys to developing the country further in the future.
Impacting HR standards in Vietnam
Economies like South Korea’s provide a road map for how a developing country can turn itself into a global leader (the other notable example being Japan). Sony, LG, Toyota, Hyundai, and Samsung are all prime examples of innovative companies that emerged as a result of necessary investments in high technology, complementary skills, and long term choices.
At the Earth Day workshop Samsung representatives advertised a realistically attainable monthly wage for “fresh staff” (university hires) of $9.7 million VND (approximately US$450—the monthly minimum wage in Vietnam is approximately US$150) and stated that the company needs high-quality people who work hard and can be promoted quickly (thereby earning the higher stated wages). By the end of next month, Samsung is looking to fill 2,000 student positions. Already, 18,000 candidates have applied (with 1,600 applicants from the University of Industry).
In general, Vietnamese workers are quick learners when properly incentivised and they are natural entrepreneurs. Companies like Samsung are leading the way to positively impact the human resources standards in Vietnam as well as to position themselves for optimal competitive advantages. However, in the not-too-distant future, attempts at a Vietnamese “Samsung,” or a Vietnamese “Xiaomi,” or a Vietnamese “Nintendo” may emerge to challenge these established players.
Investing in Vietnam: The road ahead
Vietnam is already amassing vast amounts of IT outsourcing knowledge as it continues to build its low-tech manufacturing capabilities–and now multi-nationals are training its workforce on how to assemble hi-tech components. For some Vietnamese, it may only be a matter of time before the opportunity cost to start their own company becomes too great.
Investing in Vietnam is appealing for Samsung because its new manufacturing facilities benefit from corporate tax breaks for the first four years of operations, and then half the normal rate for the following nine years, depending on meeting certain criteria. These tax breaks plus the lower cost of labor in Vietnam (compared to China, where Samsung is shifting its manufacturing from) will allow Samsung to remain competitive against rivals such as Apple and Xiaomi.
But it also means that Samsung will have to keep its Vietnamese production facilities adequately staffed in order to meet the changing global demand of its products. Without a doubt, Samsung will continue to play a critical role in the Vietnamese ecosystem for years to come as it continues to invest billions of dollars into the rapidly-developing country.