Samsung picks Vietnam for $3bn smartphone factory

Samsung shop in Vietnam Image copyright Getty Images
Image caption Samsung is increasingly shifting production of electronics goods to Vietnam

Samsung Electronics has announced plans to spend up to $3bn (£1.8bn) to create a new smartphone factory in Vietnam.

The facility would operate alongside another $2bn plant the company already runs in the country, which began production in March.

Intel, LG, Panasonic and Microsoft's handset unit are among other tech firms to have expanded manufacturing in the country over the past couple of years.

It marks a shift away from China.

Experts say the combination of tax breaks and a relatively cheap workforce make the country an appealing base when compared with its northern neighbour.

"In a way China is a victim of its own success - it's becoming so successful as an economy that it's becoming too expensive to do a lot of the manufacturing it used to attract," said Daniel Gleeson, a senior analyst at the IHS Technology consultancy.

"A lot of the manufacturers run at extremely tight margins. Even smallish cost savings by relocating to Vietnam versus China can represent a substantial competitive advantage, and driving down costs can be paramount.

"However, you have more of the Chinese companies getting into the design work, software production and essentially the high value aspects of hardware manufacturing, which means it shouldn't be too badly off if some of the relatively low value jobs leave the country."

Vietnam's government had previously said Samsung's smartphone assembly lines would not need to pay corporate taxes for four years, and only half the normal rate for the following nine years should the firm meet the terms set out in its investment applications.

Smartphone nation

Vietnam exported $19.2bn worth of mobile telephones and accessories over the first 10 months of the year - 8% more than for the same period in 2013, according to Vietnam's General Statistics Office.

Image copyright Reuters
Image caption Vietnam's phones and accessories exports are worth more than its garment and textile shipments

The sector currently accounts for about about 16% of the nation's total exports, in terms of value - making it bigger than its textile and garment industry.

Samsung intends its new smartphone factory to be built close to its existing plant - which already employs about 16,000 workers - in the north-eastern province of Thai Nguyen, close to the capital Hanoi.

However, a spokeswoman said several details still needed to be finalised.

"The $3bn investment figure is the maximum amount that can be invested during the period, which is still under discussion with the Vietnamese government," she explained.

"There are further details to be fixed before the final approval of the licence, and therefore, the specific schedule and the size of the investment are still not yet decided."

The announcement comes a month after Samsung Electronics revealed plans to build a $560m factory in Ho Chi Minh City, where it intends to make TVs, washing machines and air conditioners.

Other divisions from the South Korean company are also expanding in the country, including Samsung Display and Samsung Electro-Mechanics.

According to the Yonhap news agency, the conglomerate as a whole has invested about $11bn to date in Vietnam.

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