Why Samsung is Making Vietnam a Powerhouse — Transcript

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1. 0:00Samsung is a global business brand that every  single person around the world has heard of.
2. 0:06They know them for their smartphones,  while others for their televisions,
3. 0:09and some for their blockbuster semiconductors.  All of these combined have created the big
4. 0:15Samsung Electronics business, which is now  worth over $353 billion US dollars in market
5. 0:21capitalization. This means that Samsung’s  market cap is worth much more than some
6. 0:26nation’s gross domestic product (GDP). Such a  big business means that they are important for
7. 0:33the entire global economy. But for one nation,  they are much much more needed than any other.
8. 0:40Vietnam is a developing nation, and has opened  up its economy to many foreign investors. One
9. 0:45of the investors that took advantage of the  nation’s developing status is no other than
10. 0:51Samsung. Samsung has a massive business in  Vietnam, and when we say massive it is very,
11. 0:57very big. Their locally incorporated  company known as Samsung Electronics
12. 1:02Vietnam Thai Nguyen (SEVT) has invested  over $20 billion dollars into Vietnam.
13. 1:07This has resulted in huge economic benefits for  Vietnam, and its people. Between 2018 and 2022,
14. 1:15Samsung contributed massively to Vietnam's export  industry, achieving over $306 billion dollars in
15. 1:22export turnover. Notably, in 2022 alone,  Samsung's export turnover reached $65 billion.
16. 1:30This substantial contribution played a crucial  role in propelling Vietnam's total export turnover
17. 1:36past the $700 billion dollar mark for the first  time, ultimately exceeding $732 billion. SEVT has
18. 1:45also significantly impacted employment, generating  job opportunities for 150,000 individuals.
19. 1:51Notably, over 79,000 of these employees are  from Thai Nguyen. Additionally, SEVT has made a
20. 1:58substantial fiscal contribution, contributing over  $1 billion dollars to the state budget to date.
21. 2:04But these are only a mere overview of  Samsung Vietnam’s contribution to the
22. 2:08Vietnamese economy. Just take into account  how big one billion dollars is. It is the
23. 2:14livelihood of thousands or even tens of  thousands of people in a given year. If
24. 2:19we take a look at this from an international  trade perspective, this may undoubtedly help
25. 2:24visualize the importance of Samsung for  the entire nation. In 2022, their export
26. 2:30turnover reached 65 billion dollars. The key  to understanding how important this is is the
27. 2:35concept of exports. Exports happen when a nation  sells a product or service overseas. In this case,
28. 2:42Samsung Vietnam is exporting or selling their  products to say the United States. When this
29. 2:47happens, the United States will pay Vietnam  in US dollars. A part of this US denominated
30. 2:53currency then piles up within Vietnam’s reserves.  These reserves are essential because they enable
31. 2:59the country to maintain financial stability and  economic independence. As the reserves grow, they
32. 3:04provide a cushion against economic shocks, which  is crucial for maintaining investor confidence and
33. 3:10economic stability. It helps stabilize Vietnam’s  dong, which is the country’s local currency.
34. 3:16They are really important, but  another key in understanding
35. 3:19their impact and importance is  its history in Vietnam and its
36. 3:23future plans. Let’s first talk about  the history of Samsung in Vietnam.
37. 3:27In early 2008, Samsung Electronics announced  that it would invest 50.5 billion Korean won
38. 3:34into Northern Vietnam. The investment was for  the construction of a mass production mobile
39. 3:38handset plant. They were eventually granted the  green light by the Vietnamese government after
40. 3:43submitting the necessary documents for this  project. What made this investment possible
41. 3:48and lucrative for Samsung was because of Vietnam’s  entrance into the World Trade Organization (WTO),
42. 3:54as well as, its membership into ASEAN which  meant that cellphones produced in Vietnam
43. 3:59will be subjected to a 5 percent tariff cut in  the ASEAN market. Given Vietnam’s low labor rate,
44. 4:05and persistent government push for economic  growth, Samsung saw the nation as the best
45. 4:10destination for its plant. Hence, their  mass production factory would immediately
46. 4:15be big. It would have an annual production  capacity of over 30 million units initially,
47. 4:20and will increase to over 100 million  units in the future. Moreover, the plant
48. 4:24was cheered by local officials and businessmen,  as Samsung said that it will buy 40 percent of
49. 4:30its materials from Vietnamese suppliers and  provide jobs for over 20,000 local workers.
50. 4:35It is to many's surprise that  when we look back on it now,
51. 4:39their 46 million dollar investment was  nothing compared to their investment today.
52. 4:44A year later, by 2009, Samsung Vietnam’s  registered investment capital would balloon
53. 4:49to over 670 million dollars, and is reportedly  capable of producing 60 million cell phones every
54. 4:57single year, and is expected to reach over 100  million by 2012. The plant located in Yen Phong
55. 5:03I Industrial Zone in Bac Ninh province stated that  they were using materials and components from 32
56. 5:10suppliers, including 15 local ones. By October of  2009, they were employing about 2,300 laborers.
57. 5:17While Samsung was investing in their Bac  Ninh plant, they were also expanding other
58. 5:22businesses. Ho Chi Minh City hosts the largest  household appliance factory in Southeast Asia
59. 5:27(SEHC). Besides Samsung Electronics, investments  include Samsung Electro-Mechanics Samsung Display.
60. 5:33Samsung Vietnam in just a short amount  of time became one of Samsung’s biggest
61. 5:38manufacturing plants. There were  only seven mobile phone factories
62. 5:42run by the Samsung Group. The plant’s  first export abroad amounted to about
63. 5:4620,000 cell phones and went to the United  Arab Emirates, Thailand and Singapore.
64. 5:51In 2010, Samsung Vietnam along with the  Vietnamese government would celebrate the
65. 5:55company’s $1 billion export turnover.  The Yen Phong plant was not employing
66. 6:00over 7,000 workers, three times  as many as last year. Moreover,
67. 6:05smartphones are now being exported to over  53 countries and territories globally. The
68. 6:11total registered capital, however, still  only amounted to 916 million dollars.
69. 6:17Two years later by 2012, Samsung Vietnam  had called on the Vietnamese government
70. 6:21to provide additional incentives. Incentives are  basically benefits provided by the government to
71. 6:27encourage businesses to invest and expand in  their country. These can include tax breaks,
72. 6:32reduced tariffs, subsidies, infrastructure  improvements, and other financial or regulatory
73. 6:37advantages aimed at making the investment  environment more attractive and competitive.
74. 6:42Samsung Vietnam was already enjoying  tremendous amounts of incentives,
75. 6:46they had a preferential income tax  rate of 10 per cent for 15 years,
76. 6:50a tax exemption for four years after and a 50  per cent tax reduction for the following nine
77. 6:56years. But some authorities said this was not  enough. The expansion of Samsung Vietnam would
78. 7:02face difficulties if no assistance from the  Government is provided. Vietnam in 2012 was
79. 7:07still a time when Vietnam needed a lot of  foreign investments. Samsung Vietnam was
80. 7:12in a primed position to give it to them.  They wanted to increase their registered
81. 7:16capital to over 1.5 billion dollars. For Samsung  Vietnam to reap as many benefits as they can,
82. 7:23it is no wonder that they want more incentives. A month after this was reported, Vietnam had
83. 7:28given the green light to give more incentives to  Samsung Vietnam. This enabled Samsung Vietnam to
84. 7:33announce a new $700 million dollar investment  into the country. This big investment was for
85. 7:39a new mobile phone factory located in the  northern Vietnamese city of Thai Nguyen.
86. 7:44By the end of the year Samsung Vietnam is now  leading Samsung Electronics overseas handset
87. 7:50plants in terms of production, pumping  out over 150 million units per year,
88. 7:56accounting for one-fourth of  the company's annual output.
89. 7:59A Samsung official was quoted back  then saying that the total investment
90. 8:03in Vietnam by 2020 is expected to  grow to over 2.2 billion dollars.
91. 8:09By the early months of 2013, Samsung Vietnam  signed a 49 year lease with the local Vietnamese
92. 8:15government for its second factory in Vietnam.  The project was expected to generate 10,000
93. 8:20workers in its first year of operation, and would  increase to over 30,000 in the following years.
94. 8:26In that year, it was evident that Vietnam  has become a smartphone manufacturing hub.
95. 8:31Samsung Electronics Vietnam, alone, had plans  to produce over 240 million smartphones in 2013,
96. 8:39which was 20 percent of the world market  share. Vietnam was on to something big,
97. 8:44and they knew they were in a position to  benefit from this booming technology trend.
98. 8:49By 2015, Samsung Vietnam would now become  a big company. Their two hi-tech facilities
99. 8:55that produce mobile devices and components  in Bac Ninh and Thai Nguyen provinces have a
100. 9:00combined investment of 7.5 billion dollars.  The two facilities together exported 26.25
101. 9:08billion dollars of products in 2014, and  now created jobs for over 100,000 laborers.
102. 9:15In May of 2014, they had also announced a big
103. 9:17investment into the Samsung Consumer  Electronics Ho Chi Minh City Complex,
104. 9:22a project that covers 70 hectares and a  total investment value of 1.4 billion.
105. 9:28Fast-forward to 2019, Samsung Electronics'  four subsidiaries in Vietnam would reach
106. 9:33total revenues of 31.8 billion dollars  just for the first half of that year.
107. 9:40A significant investment announced was the 220  million dollar Research and development center
108. 9:46in the West of Hanoi. The project aims to be  Southeast Asia's most advanced R&D center,
109. 9:51spanning 11,600 square meters with a  16-floor building to house 3,000 employees.
110. 9:59Today, Samsung Vietnam is not just any small  Korean foreign investor. They are the largest,
111. 10:05and most important investors in Vietnam. From the  time they invented less than a billion dollars,
112. 10:10to over 22.4 billion dollars, they have  impacted the nation like no other. In 2024,
113. 10:18Samsung is now expecting to invest 1 billion  dollars every single year into Vietnam,
114. 10:24to further segment its smartphone base in  the country which is now responsible for half
115. 10:29of its smartphone output. But anyway, do let  us know what you think. Thanks for watching!