Samsung today announced plans to set up a $3 billion smartphone factory in Vietnam. This plan will be operating in line with a $2 billion plant that the South Korean giant already operates in Vietnam, and that has been producing since March this year.
Apparently, Samsung is not the first tech giant to set up shop in Vietnam. Panasonic, LG, Intel and Microsoft’s handset unit are among a number of global tech corporations that started manufacturing in Vietnam within the last few years.
This drives manufacturing business away from Asian powerhouse China.
Vietnam’s tax breaks and relatively affordable workforce are two of the factors that have contributed to its being a production hot zone. As China’s economy strengthens, it’s becoming too expensive to do a lot of the manufacturing work that it used to do.
Most manufacturers operate at very tight margins. Even minimal cost savings by relocating facilities to a Southern country versus China can offer a substantial competitive advantage. As a result, minimizing costs is often paramount.
The Vietnamese government had earlier said Samsung’s assembly lines would not need to pay corporate tax for a whopping 4 years, and would be obliged to pay just half the typical rate for the following 9 years should the company meet its investment terms.
Over the first 10 months this year, Vietnam exported over 19 billion dollars in mobile telephones and accessories. This is a 10 percent increase from figures recorded in 2013. The sector currently makes up about 16 percent of Vietnam’s overall exports, value-wise. These statistics are according to the General Statistics Office in Vietnam.
Samsung wants to build the new plant in a proximate location to its existing factory, which currently employees more than 16, 000 staff, near the capital Hanoi.
This move is among many others by the South Korean smartphones exporter that are geared to enhance its competitiveness on the global scene.
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