In Vietnam, a signed contract is not always an enforceable one. Many foreign investors are surprised to learn that a fully negotiated and executed contract can be declared invalid by a court, simply because it failed to meet specific, overlooked, legal formalities. This critical gap between a contract’s formation (the moment of signing) and its […]
On March 25, 2008, Samsung Electronics Vietnam was granted its first Investment Registration Certificate (IRC) with a registered investment capital of 670 million USD. Fast forward 14 years to the future, Samsung has established its undeniable position as the largest FDI investor in Vietnam, with the capital amount of nearly 19 billion USD to date, an increase of 32x compared to their starting point in 2008.
Samsung's statistics revealed that around 50% of its smartphones and tablets are produced in Vietnam and exported to 128 countries and territories, including the US, Europe, Russia and Southeast Asia. Indeed, the presence of large global corporations like Samsung has turned Vietnam into a leading exporter of electronics in the world, especially the categories of phones - components and computers - electronic products - components. According to the Ministry of Industry and Trade (MIT), these are also the two commodity categories with the largest export value of Vietnam, accounting for over one third of the national export turnover. Up to now, Samsung has been on a great and effective performance in Vietnam.
On January 19, Samsung Vietnam announced its business results for 2021 - the year in which the Vietnamese economy suffered a heavy blow from the 4th Covid-19 wave and prolonged social distancing. Despite all difficulties, the total revenue of Samsung Vietnam reached 74.2 billion USD, up 14% compared to 2020, and its export turnover reached 65.5 billion USD, up 16% compared to 2020. “The above growth in sales and exports is due to Samsung's factories strictly complying with epidemic prevention measures as prescribed by the Government of Vietnam when the fourth wave of COVID-19 occurred with complicated developments from the end of April 2021", the press release of Samsung Vietnam stated. The South Korean tech giant noted its manufacturing plants in Vietnam faced numerous difficulties from the disrupted supply chains during the second quarter of 2021, but “comprehensive support from the Government and local authorities have swiftly addressed the issues”.
Most of the corporation’s projects in Vietnam are sized above 100 million USD, including 6 manufacturing factories in Bac Ninh Province, Thai Nguyen Province, and Ho Chi Minh City, along with an R&D centre in Hanoi and an entity in charge of distribution and sales. Most notably, among these, SEV (Bac Ninh) and SEVT (Thai Nguyen) are the two largest Samsung mobile phone factories globally, and SVMC (Hanoi) is Samsung’s largest R&D centre in Southeast Asia with a total investment of over 220 million USD.
The Future of Development
Mr. Choi Joo Ho, General Director of Samsung Vietnam, affirmed that in response to the dedicated support of the Vietnamese Government, Samsung has not changed their business strategy in Vietnam despite the complications of the COVID-19 pandemic. In addition to disbursing the entire approved investment capital, every year the corporation has been making additional investments of hundreds of millions of US dollars in order to stabilise plant operations, improve productivity and product quality. By the end of 2021, the total accumulated investment capital of Samsung Vietnam had reached 18 billion USD, equal to 102% of the approved investment capital in 2020 of 17.7 billion USD.
These substantial investments are expected to be maintained in the future, with more and more diversification in terms of areas of interest, such as R&D, sales and distribution, newer manufacturing product lines, and technology and innovation. Recently, MIT has signed a memorandum of understanding (MoU) with Samsung Vietnam Complex on a cooperation project for smart factory development, which aims to support 50 Vietnamese enterprises to apply the smart factory model and train 100 Vietnamese consultants in this field. The corporation shall also look to expand its regional presence in Vietnam, with an eye towards Danang with initial testing projects to deploy 5G network solutions in the central city, as well as exploring possible investments in the hospitality space.
The Role of Vietnam in the GVC of Samsung
According to the Ministry of Industry and Trade, in 2019, the four major Samsung units including Samsung Thai Nguyen, Samsung Electronics Vietnam, Samsung Display Vietnam and Samsung HCMC CE Complex had achieved total revenue of over 1.5 thousand trillion VND, equivalent to nearly 66 billion USD. Among all global Samsung suppliers, Vietnam’s contributed nearly 20% of net income for the corporation globally.
The South Korean corporation has also made consistent efforts to increase the participation of Vietnamese enterprises into their global supply chain. In 2019, Mr. Choi Joo Ho reported that 210 Vietnamese enterprises have participated in Samsung's supply chain and that the corporation continues to seek more qualified suppliers in the electricity and electricity sectors. In the period from 2014 to 2019, the number of Vietnamese enterprises selected as the first-tier supplier of Samsung had increased tenfold from 4 to 42 and reached 50 in 2020. Additionally, many other firms had also been selected as Tier-2 suppliers, generating great resonance among the domestic value chains.
Furthermore, the 220 million USD investment that Samsung has made to develop a 11-hectare R&D centre in Hanoi solidifies Vietnam’s evolution in the GVC of this global corporation. The nation is now viewed by Samsung not only as a central manufacturing hub globally, but also as a strategic R&D hub in the region of Southeast Asia and globally. Mr. Choi Joo Ho asserted Samsung’s determination to foster the learning capacity of Vietnamese talents in the frontier fields of AI, IoT, Big Data, and 5G, creating a foundation for the nation to move ahead of the pack in the Fourth Industrial Revolution. He also added, “The R&D centre not only proves Samsung’s long-term investment commitment in Vietnam but also shows the group’s determination to support the country in becoming the leading manufacturing hub in Southeast Asia.” With the continuous support from Hanoi People’s Committee, by mid-May 2022, the construction has completed 70% of its workload and the centre is on pace to commence its operations by end of 2022. When the centre starts operating, it is expected to raise the total R&D headcount of Samsung in Vietnam to over 3,000.
