Vietnam picked up another win after LG Electronics decided to transfer its smartphone manufacturing plants from South Korean to a plant in Haipong. The company hopes the move turns around the fortunes of its lagging phone business which has recorded quarterly operating losses for nearly four years, according to the Nikkei Asian Review.
When the move is expected to be completed later this year, it will be another victory for Vietnam’s technology manufacturing sector. LG Electronics already has a plant in the country and now becomes the latest South Korean firm to move phone manufacturing operations to Vietnam. Rival Samsung is already the Vietnam’s largest exporter.
“Most of ASEAN countries are under the influence of Japan, but Vietnam is an exception. It has close relations with South Korea,” Lee Tae-joo, President of Re-shaping Development Institute, told Nikkei.
But it’s not just Korean companies setting up operations in Vietnam. Taiwanese electronics manufacturers have been moving production out of China and to Vietnam in order to escape US tariffs. Hon Hai, Compal Electronics and Wistron NeWeb Corp. are among the Taiwan tech firms to have made the switch.
Why Vietnam?
LG Electronics is moving the smartphone manufacturing to its plant in Haipong, a port city roughly two-hours east of Hanoi by car. The location highlights one of the many things overseas businesses like about Vietnam, the ease of getting goods out of the country. There are several ports along the South Sea that offer easy access to numerous logistics hubs such as Singapore and Guangdong.
There is more to the country than a convenient location. Vietnam’s labor rate currently sits below USD3 hourly and is only expected to be USD3.10 per hour in 2020, research from IHS Markit Technology found. Companies, such as LG Electronics, are able to save a great deal on labor costs by moving operations to Vietnam.
And for the most part, this is skilled labor. Vietnam has a population of more than 95 million and a median age of 30.5 years old with a generation now having grown up around technology.
“Nothing is like Silicon Valley, with its elements on innovation, first-movers, and world-changing technology,” Hung Q. Nguyen, CEO, President and Co-Founder of software testing company LogiGear, explained in an interview with PC Magazine. “But (Vietnam) is very vibrant, very forward-looking. The workforce itself doesn’t yet know quite what it’s like to do business the way the West does but, from the perspective of a tech hub, Vietnam has a lot of potential.”
