Samsung to Get License for New Plant in Vietnam Expansion

Samsung Electronics Co. is close to receiving a license to build a second smartphone factory and investing as much as $3 billion north of Hanoi as the company increasingly turns to Vietnam as a manufacturing hub.

The project will be approved as early as tomorrow and would bring Samsung’s total investment in Thai Nguyen province to $6.4 billion, Duong Ngoc Long, chairman of the local People’s Committee, said by phone today. Samsung, maker of the Galaxy line of smartphones, confirmed it’s in talks with the government, though it said $3 billion represents the maximum investment amount.

Samsung, the world’s largest smartphone maker, is leading a wave of technology companies turning to Vietnam’s young workforce to assemble their gadgets. The growing difficulties of operating in China, as well as Vietnam’s low-cost labor and generous tax benefits, are attracting technology companies, said Lam Nguyen, Ho Chi Minh City-based country director at International Data Corp.

“They now see a lot of risk in China because they are competing with Chinese vendors,” he said by phone. “They have become fierce competitors. Vietnam is in a unique position. You have a motivated workforce and in terms of labor costs, they are cheaper than China, cheaper than Thailand.”

Samsung’s push into Vietnam comes as the company faces the toughest challenge yet to retain its top spot in the smartphone market. Apple Inc.’s iPhone 6 models are winning customers in the high-end, large-screen market, while smaller rivals, such as Xiaomi Corp. and Lenovo Group Ltd., are attracting budget buyers in China.

The company is in talks with the government and specifics such as the scale of the investment and timing have yet to be decided, Samsung said in an e-mail.

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Samsung, which opened its Thai Nguyen complex in March, will pay no taxes for the first four years and half the full rate the following nine years for the site, Long said in an interview earlier this year.

The new Thai Nguyen facility, which would be in the same complex, will increase Samsung’s total investment in Vietnam to $11.2 billion, Dau Tu newspaper, a publication of the Ministry of Planning and Investment, reported Nov. 10.

In September, the Ho Chi Minh City People’s Council approved incentives for Samsung’s $1.4 billion electronics factory, according to Thanh Nien newspaper. In October, the company said it would build a $560 million complex to make televisions and home appliances in Ho Chi Minh City. In July, Samsung Display received approval from the northern province of Bac Ninh to build a $1 billion assembly plant.

Vietnam is benefiting from shifting supply chains as technology companies look for new manufacturing locations. Nokia Oyj, LG Electronics Inc., Intel Corp. and Wintek Corp., a supplier of displays to Apple Inc., have set up operations in Vietnam. Korean companies in particular are drawn to Vietnam, Nguyen said.

“The Korean and Vietnam governments have a good trade- and business-exchange framework,” he said. “That gives Korean companies a lot of motivation to come to Vietnam. It’s about timing.”