Samsung Electronics has established a large manufacturing complex in Vietnam to take advantage of the country's strategic location, low costs, and growing consumer market. The complex produces smartphones, tablets and other electronics and employs over 100,000 workers. Samsung's investment and operations have helped seed the development of Vietnam's electronics industry by transferring technology, developing the local workforce, and encouraging the growth of local supplier companies. As a result, Vietnam has begun to establish itself as a hub for electronics production and exports in Southeast Asia.

1. Global Cooperation and Corporate
Internationalization Strategy
- Samsung Electronics’ Manufacturing
Complex in Vietnam
Hansoo Kang
Plenary Session 3: Global Cooperation and Cluster Internationalization

2. 2015. 11. 5
Samsung EconomicResearch Institute
Global Cooperation and
Corporate Internationalization Strategy
- Samsung Electronics’Manufacturing Complex in Vietnam

3. 1

4. Globalization of Corporate Activities
 In today's business environment, globalization of large firms'
value chain activities is a necessity, not a choice
- Production systems are complex, with multi-layered international sourcing
networks and rapidly changing technologies. This has facilitated the
expansion of firms’ cross-border activities
 Most of the large global firms organize their activities in a
'Global Value Chain'
- “International production, trade and investments are increasingly organized
within global value chains(GVCs), where different stages of the production
process are located in different countries” (OECD)
 The question is not 'if', but 'how?'
: Some globalize through outsourcing,
Others choose to do it on their own through FDIs
2

5. Firms' FDIs and 'Locational Advantage'
3
 Global firms' FDIs: From 'asset exploiting' to 'asset seeking'
- Today, most firms' FDI decisions are motivated by strategic considerations
rather than simple extension of existing competencies or the lure of lower
cost resources elsewhere
 FDIs are increasingly pursued to combine MNCs' global
strategy and (developing) countries’ locational advantage
- MNCs conduct outward FDIs to place the core activities of their global value
chain in most efficient locations
- (Developing) Host countries use their local advantage to recruit MNCs’
high value-added business and promote their economic development
- Local advantage often correlates with the existence of clusters
• “A location’s best chance of attracting foreign
investment and promoting exports is in existing or
emerging clusters.” (Michael E. Porter)

6. Creating a Virtuous Cycle through Cooperation
4
Low cost Inputs, Infrastructure,
Government Incentives, Institutions etc.
Productivity,
Innovation,
New Business
Technology Transfer, Supplier Support,
Partnership with Local Universities,
Employee Training etc.
Seeding,
Growth& Upgrades
Outward FDIs
Large Global Firms (Fledgling)
Local Clusters of
Developing Countries

7. 5

8. Consumer Electronics
Samsung Electronics : Businesses
6
IT & Mobile Communications
Device Solutions
Visual Display
Business
Digital Appliance
Business
Printing Solutions
Business
Health & Medical
Equipment Business
Mobile Communications
Business
Network
Business
Memory
Business
System LSJ
Business
LED
Business

9. Samsung Electronics : Global Network
 213 world-wide operation hubs, including 15 regional HQs
- While most electronics companies today choose to outsource their production,
Samsung has kept most of its production ‘in-house’ and operates global
production sites in 17 countries
7
Europe
Middle East JapanKorea(HQ)
Southwest Asia
Southeast AsiaAfrica
North America
Latin America
320,000 Employees in84 Countries
2
3
17
4
1
1
1
8
3
CIS*
1
1
4
2
China
2
13
2
7
1
1
1
3
1
2
1
4
1
2
7
9
2
1
5
6
1
1
1
2
1
2
2
2
5
1
1
3
7
1
* CIS : Commonwealth of Independent States
15
38
54
36
6
64
Regional Headquarters
Global Production Bases
Global Sales Bases
Global R&D Centers
Global Design Centers
Others*
* Sales Branches,
Service Center,
Distribution Bases, etc.
In-house Production Rate 90%
Localized Designers 1,700 persons

10. ► SEV (1st facility)
• Location: Bac Ninh Province,
Yen Phong
• Investment: Initial $1.5billion (2008),
Follow-up $1billion (2013)
• Area: 1.12 million square meters
• No. of Employees: 48,000
► SEVT (2nd facility)
• Location: Thai Nguyen Province,
Yen Binh
• Investment: $2billion (2013~2014)
• Area: 1.82 million square meters
• No. of Employees: 50,000
Manufacturing Complex in Vietnam
 3,000,000m2, with 100,000 employees at two plants
- Samsung Electronics’ Manufacturing complex in Vietnam has two facilities
* SEV

11. Foreign
Manufacturing
Hub
9
Why Vietnam?
Success Factors for a Foreign Manufacturing Hub
Local/Regional
Demand
Local Government
Support
Supplier Base
Infrastructure Human Capital

12. 10
Why Vietnam? - Demand & Potential
 A large and youthful population
 A major member state in ASEAN (free trade)
- TPP agreement in 2015
ASEAN Overview
Total Population : 600 million
GDP : $2.0 trillion
Free Trade Agreements with
China, Korea, Japan, India,
Australia, and New Zealand
(Potential Reach: +2,800 million)
POPULATION : 91 million
(No.3 in ASEAN, No.13 in the world)
YOUNG DEMOGRAPHICS
(Age 0~30 : 63%)
STRONG CULTURAL EMPHASIS
ON EDUCATION & SUCCESS
VIETNAM OVERVIEW
ONE OF THE FASTEST GROWING
OF THE EMERGING ECONOMIES

13.  Local Government Support
 Low Cost Infrastructure
• Land Development /
Workforce Training
• Export Customs
Inspection Center
• Most Favored Terms
for 50 years
• Exemptions on
Import Tariffs & VAT
11
Why Vietnam? - Government Support and Infrastructure
• Exempt for 4 years,
5% for 12 years,
10% for 34 years
- The stability of Vietnam's transportation and electricity infrastructure is
not yet first rate, but its low utility costs are a strength
Vietnam Complex Gumi (Korea)
Industrial Electricity $0.06/kwh $0.09/kwh
Water $0.4/kwh $1.2/kwh
Mobile Communications $0.05/min $0.1/min

14.  The best location for logistics
- Close to Noi Bai International Airport (air transport), Hai Phong Port (marine
transport), and the Chinese border (land transport)
12
※ Location of the Complex
NoiBai
Int’lAirport
Hai Phong Port
Hanoi
SEVT(1.82milm2)
SEV(1.12mil.m2)

15. Why Vietnam? - Young Workers and Low Wages
Average Wages
13
- About 1/10 of the KoreanAverage
- In 2012, Samsung Electronics hired approximately 20,000 workers in Vietnam.
This would not be possible in Gumi, Korea
• No. of high school graduates who do not go on to college within 200km
of the manufacturing facilities (2011)
: 64,000 (Gumi) vs. 223,000 (Vietnam)
Gumi Vietnam Complex
Average Monthly Wages 3,715 353
(US＄)
* Gross amount including overtime charges
 A Large Pool of Young Workers
 Low Wages

16. Providing seeds for a cluster to bloom
“One of the key tasks of the complex is developing
top-tier technical and product capabilities in close
partnership with local suppliers.
Samsung understands the importance of components
and the equipment ecosystem. That is why Samsung
has implemented various supporting programs to
raise its suppliers to become leaders of their own
industry.”
14
Myeongsup Han,
Head of the Vietnam
Manufacturing Complex
Samsung’s Contribution to the Vietnamese Community
 Initiation of a Virtuous Cycle
- Aside from the direct financial contribution, development of the complex
has created a “win-win” situation for both Samsung and Vietnam
• In 2014, Samsung Electronics,the second largest company in Vietnam, paid $53 million
in taxes

17.  Sharing of Cutting-Edge Technology
- More than 1,200 researchers are working at the software R&D center in Hanoi,
and they are all locally employed
• "The fastest way for Samsung Electronics to grow is through promoting technology
development from cooperation with foreign manufacturing complexes.“
 Enhancing the capabilities of local employees and
the community
- STP (Samsung Talent Program): An industry-academia cooperative
educationprogramat the Hanoi University of Science and Technology,
and Post & Telecommunication Institute of Technology (PTIT)
• Students selected for the STP can take computer programming courses at Samsung
Labs and the best performing students are offered internships at Samsung Electronics’
R&D center (SVMC)
15
Samsung’s Contribution to the Vietnamese Community

18.  Since 2009, numerous Samsung affiliates and their domestic
partner companies have entered Vietnam
- More than 90 partner companies of Samsung Electronics are in operation in
Vietnam, most of which are from Korea
16
Samsung Affiliates' investment in Vietnam
Company Location
Commencement
of Production
Products
Invested
($100 Mil.)
Samsung
Electronics
Bac Ninh 2009.4
Smartphones, Tablet PCs,
Wearables
25
Thai
Nguyen
2014.3
Smartphones, Tablet PCs,
Accessories
20
Samsung SDI Bac Ninh 2010.7 Battery Packages 1.2
Samsung
Electro-
Mechanics
Thai
Nguyen
2014.8
Chip Components, Camera
Modules etc.
12.3
Samsung
Display Bac Ninh 2015.3 Displays 10
Samsung’s Contribution to the Vietnamese Community

19. 17

20. The Vietnam Complex's Contribution to Samsung
 Growing Importance for the Vietnam Manufacturing
Complex in Samsung' business
- About half of Samsung Electronics' cell phones are produced in Vietnam
18
Cell phone Sales for the Vietnam Manufacturing Complex
SEV
SEVT
($100mil.)
61
130
243
188 168
78
200
2011 2012 2013 2014 2015
266
368

21.  As the necessary knowledge, infrastructure and institutions
coalesce in Vietnam, global companies are starting to gather
19
Electronics Product Exports from
Vietnam
* Source: KOTRA
A Cluster Forming in Vietnam?
(Billion Dollar)
Global Firms' Investments in Vietnam
• Invested $1bil. in 2007 to build a
semiconductor manufacturing facility.
• 2nd stage investment is in progress
in the Hai Phong area
• 1st Stage(2013~2017): Plans to invest
$510 million
• 2nd Stage(2017~2023): Plans to invest
$990 million
• Nokia established a cell phone
manufacturing facility in Bac Ninh
with $300 million in investment
• Has maintained four operating
facilities since 2002
• Annual exports: $1.3 billion (2014)
• Established operating facilities by
investing $120 mil. in Hai Phong
3.4
6.9
20.5
31.8
35.0
2010 2011 2012 2013 2014

22. Wrap-up
• A virtuous cycle of cooperation between Samsung
Electronics and Vietnam seems to have started to work
– More Investment: In 2015, Samsung Electronics decided to invest additional
$3 billion in the SEVT complex
– Searching for Local Suppliers: In 2015, in cooperation with the Vietnamese
government, Samsung Electronics provided a list of 144 smartphone and tablet
PC components that it wants local partner companies to supply
• The journey is still on going
– Samsung Electronics started construction on
another manufacturing complex in 2015
to produce consumer electronics products
within Ho Chi Minh City SHTP(SaigonHi-Tech Park),
a newly forming hi tech cluster
20

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