Update: Microsoft renames Nokia Vietnam Company [News VietNamNet, Dec 20, 2014]: Nokia (Vietnam) Limited Liability Company was renamed Microsoft Mobile (Vietnam) Limited Liability Company, according to an official decision of Microsoft Vietnam released on December 18.
Microsoft had earlier changed the name of the Nokia Lumia cell phone line to Microsoft Lumia. The first mobile phone line with the Microsoft brand was sold at the end of November. However, Microsoft and its retail stores will continue to sell old phone lines with the Nokia Lumia brand.
Nokia officially inaugurated its factory in the northern province of Bac Ninh in October 2013. Since Microsoft’s takeover in April, Nokia has produced nearly 74 million mobile phones by the end of November.
The factory is considered to be Microsoft’s main global supplier after the American software giant transferred its smartphone production lines from China and Mexico to Viet Nam in August 2014.
Microsoft Mobile Vietnam has exported more than five million Lumia mobile phones to the rest of the world thus far. The factory currently has more than 10,000 employees, which include highly skilled engineers.
Samsung has been the pioneer of exploitation of much cheaper manufacturing opportunity in Vietnam. While its production capacity in 2009 was 1.5 million units per month there (from October), it increased to 6 million per month by the end of 2010. Now it is standing at 20 million per month with total of 240 million this year out of the planned total of 510 million.
Relative to that Nokia’s new plant was launched with 5 million units per month capacity for 2013 which could be raised to 15 million units per month by the end of 2014 as the earliest, or by the end of 2018 as the latest.
After loosing the overall phone marketshare this year to Samsung it is now Nokia’s turn to play the catch-up game in manufacturing efficiency and economy like Samsung was launching a similar game against Nokia in 2010. To understand Nokia’s opportunities in this regard one must understand the circumstances which I will explain via the headlines of collected publications you can read further on in detail:
– “Nokia will be merged into another company, 40 per cent probability”[Ilta-Sanomat, June 20, 2013]
– First Nokia exports dial in a new manufacturing era [Vietnam Investment Review, June 10, 2013]
– Nokia’s Vietnam factory opens in Hanoi City [VMPoweruser, April 17, 2013]
– Nokia – Samsung the battle of the two tigers [News VietNamNet, May 18, 2013]
– Unboxing the cheapest Nokia phone manufacturered in Vietnam [Vietnam News World Vietbao.vn, June 21, 2013]
– Samsung Secures Tax Breaks for Vietnam Handset Factory [cellular-news, June 20, 2013]
– Work begins on Samsung’s largest cell phone factory [VietNam News, March 26, 2013]
– Samsung aims to sell 510 million phones [The Korea Times, Dec 23, 2012]
– Samsung Vietnam SEV-Project [SAMOO Architects & ENGINEERS, 2011]
– Samsung Boosting Handset Output in China to Beat Nokia [The Korea Times, March 22, 2010]
– Dial Vietnam For Cheap Labor [The Nikkei Asian Review June 12 edition, 2013]
– Why Vietnam is the new China for the global electronics giants[whathifi.com, Feb 19, 2013]
Let’s start with the news that “Nokia will be merged into another company, 40 per cent probability” [Ilta-Sanomat, June 20, 2013] as translated by Google and Bing with manual edits
Nokia is combined with another company 40 percent chance in the next two years, estimates research firm Strategy Analytics.
Rumors of Nokia’s sales to another company have been moving for a few years already. According to research firm Strategy Analytics, the probability of combining Nokia with another company in the next two years is 40 per cent.
– Nokia has an impressive distribution network and an extensive patent portfolio, which many companies would benefit from, according to [Strategy Analytics] director Neil Mawston assessment.
Mawston says Samsung, LG, Huawei, Microsoft, Google and Cisco, for example, could afford to buy Nokia, and they also benefit from the sales of the company.
Nokia this week contacted Huawei and Microsoft. On Tuesday, the newspaper Financial Times reported that Huawei would be considering the purchase of Nokia. However, the company denied the allegations later, according to the news agency Reuters.
– I think it is very unlikely that Huawei would be acquiring Nokia at the moment, estimates Director Ben Wood of CCS Insight research company.
According to him, Huawei might be interested in the future in some of Nokia’s operations, if Nokia’s business deteriorate dramatically. In addition, he believes that the Chinese manufacturer would have major legal obstacles if it is going to buy a Nokia.
On Thursday, in turn, the newspaper The Wall Street Journal reported that Nokia and Microsoft negotiated in mid-June, the company store, where Microsoft would buy Nokia’s mobile phone business.
According to the newspaper the sales of the company got bogged down due to the weak market outlook for Nokia, among other things.
We have to have in our mind the other news that First Nokia exports dial in a new manufacturing era [Vietnam Investment Review, June 10, 2013]
Nokia has exported the first volume of made-in-Vietnam mobile phones, as the Finnish company plans to expand its investment and operations in Vietnam.
Ivan Herd, general director of Nokia (Vietnam) LLC, told VIR that the handset maker has started production at its $302 million factory in Vietnam-Singapore Industrial Park in Bac Ninh province, about 20 kilometres from Hanoi, after one year of construction.
Although some of the factory’s facilities remain at construction process and the factory is expected to be launched sometimes in August or September, Herd said “we hope Nokia Vietnam would become one of the largest factories of Nokia in the world”, implying a possibility to further expand investment in Vietnam. He declined to give further details.
Near the factory, Nokia’s rival – Samsung Electronics – has been aggressively expanding its mobile phone manufacturing, raising total investment from $670 million to $1.5 billion. The South Korean firm is also turning Vietnam into one of its biggest manufacturing hubs in the world, starting construction on another $2 billion manufacturing complex in Thai Nguyen province in March.
The first shipment from Nokia factory marks a milestone as for the first time a Nokia handset made in Vietnam has been exported globally.
“We will start with our Nokia 105, and as our capabilities improve, we will move on to other more difficult products,” said Herd.
“Our factory in Vietnam will be part of the global supply network so the expectation is that a maximum 5 per cent of our products will be exported to domestic market,” he said.
Nokia received investment certificate for this factory in late 2011 and the new factory is expected to attract more electronic component suppliers to Vietnam.
So far, Nokia has recruited over 300 employees for this factory. “By the end this year, our employee number will be thousands,” said Herd.
“Nokia does not focus on one cost element but total supply chain costs, infrastructure, our extended supply chain and customer locations. These are the main reasons we moved to Vietnam,” he said.
In the very first news about Nokia’s Vietnam factory opens in Hanoi City [VMPoweruser, April 17, 2013] we had more information as well:
Nokia Vietnam has indicated that their new Hanoi City factory, which broke ground last year, is now up and running, posting pictures of the facility and staff on their Facebook page.
The factory is located in the Vietnam-Singapore Industrial Park (VSIP) in Bac Ninh, a province in the north of the country, and may employ up to 10,000 workers by 2014, churning out 45 million handsets per quarter [180 million yearly].
The handsets are predominately expected to be low-end, but hopefully it will increase Nokia’s capacity overall, and help eliminate those annoying supply issues which has dogged Nokia’s popular Windows Phone smartphones recently
Later the Vietnamese were assessing Nokia – Samsung the battle of the two tigers [News VietNamNet, May 18, 2013] as follows:
VietNamNet Bridge – Finnish Nokia still holds the biggest mobile phone market share in Vietnam. However, its Number 1 position has been shaken with the rise of Samsung.
Nokia plans to put the factory in the Vietnam – Singapore Industrial Zone in Bac Ninh province into operation in June 2013, when it would churn out 30 million products. The productivity would increase gradually to 180 million products by 2018.
Of the total investment capital of $302 million, $67 million would be disbursed in 2013, while the figure would be $100 million in 2014 and $102 million in 2015.
In order to attract Nokia to Vietnam, the country has to offer a lot of investment incentives, including the preferential corporate income tax of 10 percent for the first 15 years of the production, and the corporate income tax exemption for the first 4 years and the 50 percent tax reduction in the next 9 years.
With the investment capital of over $300 million in total, Nokia is hoped to generate 10,000 workers.
The fact that Nokia has closed down some of its factories in the world, but sets up a new factory in Vietnam can show the attractiveness of the Vietnamese market. This might also be the reason for Samsung to develop its projects in Vietnam.
According to GFK, a market survey firm, Nokia held 54 percent of the market share in 2011 and 56 percent in 2012. However, if considering the value, the giant has made a step back with the market value decreasing from 52.6 percent in 2011 to 45 percent in 2012.
The decline of Nokia has brought the golden opportunities to other manufacturers, including Samsung, to arise.
In 2011, Samsung only accounted for 15 percent of the total mobile phone products consumed in the market. The figure rose to 23 percent in 2012. However, if considering the value, Samsung’s share market increase is sharper, from 17.8 percent to 30.6 percent.
Especially, in the last months of 2012, Samsung, while accounting for 21 percent of the market share only, had its products’ value accounting for 34 percent of the total market value.
It seems that Samsung has left the popular mobile phone market segment opened, while concentrating on smart phones. The popular mobile market segment is believed to be less profitable than the smart phone segment. The South Korean manufacturer targets the high income earners who like using fashionable products.
Also according to GFK, in terms of quantity, in the popular mobile phone market, Nokia’s market share increased from 55.9 percent in 2011 to 65.5 percent in 2012. Meanwhile, Samsung’s has been hovering around 15.1-15.3 percent.
In the smart phone market segment, Samsung’s market share has been expanding steadily from 22.7 percent in 2011 to 46 percent in 2012. Meanwhile, Nokia’s decreased sharply from 46.6 percent in 2011 to 24.2 percent in 2012.
The fact that PSD, which was a distributor of Nokia’s products in Vietnam with 45 percent of market share, said goodbye to Nokia and joined hands with Samsung after that, is an evidence showing that it’s very difficult to obtain the market, but it’s even more difficult to retain it.
PSD began distributing Nokia’s products in mid 2007, when there were three other Nokia product distributors already, including FPT.
In 2009, the amount of Nokia phones distributed by PSD and FPT was equal. Both of them distributed the number of products accounting for 95 percent of the total Nokia’s products sold in Vietnam.
As such, the parting of PSD would be the bad news for Nokia when implementing its business plans in the Vietnamese market.
And lately we had the first product review in Unboxing the cheapest Nokia phone manufactured in Vietnam [Vietnam News World Vietbao.vn, June 21, 2013] as translated by Google
Cheap phone Nokia 105 were present at the shelves nationwide priced at 450,000 [$21.4]. This is the first phone to be manufactured in the factory of Nokia Vietnam Bac Ninh.
Right on the box of the product, you will easily see the words: “the first Nokia phone made in Vietnam”. We can say that this product line is the first important step of the Nokia factory Vietnam to continue rolling out other products in the future, ensuring good price, suitable for Vietnamese consumers .
Nokia 105 has candybar design with a lightweight of 70 grams, but the machine is quite thick with dimensions of 14.3 mm. The cover of the Nokia 105 good plastic material used to manufacture, ensuring that the machine works well when accidentally falling or collision.
Nokia equip 1.45 inch color display with resolution of 128 x 128 pixels and supports 65,000 colors. Capacity 800 mAh battery provides talk time up to 12 hours and 30 minutes. At the same time, the machine also supports the practical functionality for everyday life, like the popular phones like its previous FM Radio and flashlight.
Currently Nokia 105 to be sold at the price of 450,000 Vietnam dong [$21.4].
Vietbao.vn (According Zing News)
At the same time we had the news that Samsung Secures Tax Breaks for Vietnam Handset Factory [cellular-news, June 20, 2013] which is showing quite well how Samsung has about 3 years of advantage in terms of exploiting the Vietnamese manufacturing capability:
Samsung Electronics has secured a range of tax breaks for its new factories being constructed in Northern Vietnam.
The company’s US$2 billion cellphone and tablet assembly plant won’t have to pay tax for the first four years of operation and will get a 50 percent break for the next 12 years.
The company also plans three more factories, including a US$1.2 billion investment in a semiconductor facility and each of those will see their land rent reduced by half.
The four factories are based in the Yen Binh Industrial Zone in Pho Yen District, and the first — the handset factory is due to start production by the end of this year.
Samsung’s exports from Vietnam last year were worth $12.7 billion, more than 11 percent of the country’s total exports — although it also imported around US$11.3 billion of components. The company employs around 24,000 staff in the country.
Vietnam is increasingly seen as an alternative to China, where rising wages along the coastal regions and increased international pressure on workers conditions are making the area less appealing for future investment.
And Work begins on Samsung’s largest cell phone factory [VietNam News, March 26, 2013]
THAI NGUYEN (VNS)— Prime Minister Nguyen Tan Dung yesterday applauded Samsung’s decision to expand operations in Viet Nam, adding that it would contribute to the strategic partnership between Viet Nam and South Korea.
He was attending the Samsung Group’s ground-breaking event for the construction of a US$3.2 billion high-tech complex in the northern province of Thai Nguyen.
The complex, which will house Samsung’s largest mobile phone factory, is expected to provide jobs for thousands of local people.
It will also contribute tens of billions of US dollars to the country’s annual export turnover, while boosting the development of the electronics support industry in the northern region of Viet Nam.
Dung spoke highly of South Korean businesses’ operation in Viet Nam and pledged to create favourable conditions for them and other foreign businesses to do business in the country on the basis of friendship, co-operation and equality.
The same day, the Prime Minister held a working session with provincial leaders where he urged Thai Nguyen Province to use its potential and advantages in agro-forestry and industry.
Dung affirmed the Government’s policy of creating the best possible conditions for Thai Nguyen to develop into an economic, political, cultural and educational centre in the northern midland and mountainous region.
On the province’s famous tea trees, the leader said Thai Nguyen should develop industrial-scale processing for the product, which was key for the locality’s poverty reduction.
He also urged Thai Nguyen to improve the investment environment, reforming administrative procedures and attracting high-tech projects.
Last year, the province recorded an economic growth of 7.2 per cent, generated jobs for 22,600 people and reduced the percentage of poor households by 2.93 per cent.
Particularly, tea trees have been a lifeline for poor families in the province with the crop growing on a total area of 18,500 hectares. — VNS
The Korean technology giant is the world’s largest maker of mobile phones and aims to ship a record 510 million handsets next year.
That would be a 20 percent increase from the estimated 420 million devices this year, according to sources from the company and its suppliers. It shipped around 288 million handsets through the first nine months of the year and is expecting a global Christmas bump.
”Of the 510 million handsets it plans to sell, 390 million are slated as smartphones and 120 million, feature and budget phones,’’ according to an executive from one of Samsung’s key suppliers.
Aside of its Galaxy smartphones and tablets, which have emerged as the main competitors to Apple’s iPhones and iPads, Samsung is planning to release a lineup of devices powered by Microsoft’s Windows 8 mobile operating system. It will also push products that support TIZEN software, which Samsung jointly developed with semiconductor rival Intel.
”There are some possibilities that smartphone demand will slow in general. But we are seeing new demand for devices using Long Term Evolution (LTE),’’ said Kim Hyun-joon, an executive at Samsung’s telecommunications division.
Another source said that Samsung expects to manufacture 240 million devices at its Vietnamese factory, 170 million in China and 20 million in India to complement the 40 million to be produced in its Korean factory in Gumi, North Gyeongsang Province.
In order to effectively save costs on manufacturing, logistics and delivery time, Samsung will spend $2.2 billion on its handset factories in the Vietnamese towns of Bac Ninh and Thai Nguyen by 2020 to boost output.
”By offering better pricing to consumers in developing nations, we will find new growth. This will also enable consumers in developed nations like North America and Europe to buy our LTE devices at more affordable prices,’’ said a Samsung official.
The plan contrasts a previous outlook by leading market researcher Gartner, that predicted the Korean firm to sell between 250 million and 300 million smartphones next year. In 2011, Samsung sold 97.4 million smartphones, up from 23.9 million and 0.6 million in 2010 and 2009, respectively.
Analysis from HIS iSuppli, another research firm, noted that Samsung is set to seize the global mobile handset market’s top ranking this year, ending the 14-year reign of Nokia.
The report projects Samsung will account for 29 percent of worldwide mobile shipments, up from 24 percent in 2011, while Nokia’s share will drop to 24 percent, down from 30 percent last year.
”Samsung’s proven ability to quickly produce and replace a wide range of handsets aimed at several different markets contrasts with Nokia’s struggles and Apple’s difficulties that are mainly related to parts sourcing problems,’’ said Hwang Min-seong, an analyst at Samsung Securities.
Hwang expects Samsung’s handset division to raise its profit to 21 trillion won [$18.16B] next year from an expected 19 trillion [$16.43B] won this year.
Samsung Vietnam SEV-Project [SAMOO Architects & ENGINEERS, 2011]
- 2 Stories
This was started 3 years ago with the declaration that Samsung Boosting Handset Output in China to Beat Nokia [The Korea Times, March 22, 2010]
For better logistics and labor costs, the world’s second-biggest manufacturer of mobile phones is giving more responsibility to its Chinese affiliates, while the company is leaning toward high-end and pricy phones for its local line, officials told The Korea Times Monday.
According to Samsung and industry officials, it has been set to make over 210 million units or some 80 percent of the total outside South Korea in 2010.
Shin Jong-kyun, president of Samsung’s telecommunication division, which is in charge of mobile phones, earlier said the company will sell a maximum 270 million handsets including 18 million smartphones by the end of this year.
Samsung’s factory in Huizhou, China, is expected to produce 72.9 million units (27 percent), while another China-based factory in Tianjin will manufacture 70.2 million (26 percent).
The other Chinese facility in Shenzhen will produce some 7 million handsets, the officials said.
A plant in Vietnam will handle 37.8 million units (14 percent), while 59.4 million (22 percent) will be produced from the local line in Gumi, North Gyeongsang Province. Lines in Brazil and India will produce 19 million and 10 million, respectively.
Over the past five years, the proportion of Samsung’s mobile handset output that has been manufactured overseas has risen dramatically.
The consumer electronics giant is seeking to cut costs and use these savings to invest in the development of new technologies such as touch-screens and powerful mobile software used to drive the devices’ operating systems.
It can be used to compete with other international brands such as Nokia, Apple of the United States and Research In Motion (RIM) in Canada.
Samsung’s proportion of overseas mobile phone production is forecast to reach a record 78 percent throughout this year. The proportion has steadily risen from 25 percent in 2005 to over 70 percent in 2009, they said.
“The biggest change was that Samsung has given more production authority to its Huizhou affiliate. Better cost cuts in logistics and labor had been the top considerations,” a high-ranking industry official said.
Samsung Electronics has lowered its portion of mobile phone production in Tianjin to 26 percent from last year’s 33.5 percent. In contrast, the company raised the levels in Huizhou and Vietnam, respectively.
“Due to cost factors, Samsung’s key lines in mobile phones are going to the south. Better prices for labor and logistics mean better cost competitiveness, boosting edges in low- and mid-tier phone segments,” a Samsung official said, asking not to be identified.
Huizhou is a city located in central Guangdong Province. The city looks out to the South China Sea to the south, while the city Tianjin is near China’s capital city of Beijing.
Officials say an increased output plan at its factory in Vietnam has also been matching Samsung’s realignment moves in production.
Last October, Samsung opened a $700 million manufacturing plant in the northern province of Bac Ninh, Vietnam. It is its first foreign-owned handset factory and the 7th Samsung plant operating outside South Korea.
The factory’s estimated production capacity in 2009 was 1.5 million units per month, however, that will increase to 6 million per month by 2010, and 9 million by 2011, according to representatives.
“It’s natural to give more authority in production to regions that have competitive edges in costs as Samsung has been expanding its output in the global market,” a company spokesman said.
Its local line is handling high-end and pricey phones such as AM OLED-embedded devices. Samsung is pushing for the so-called AM OLED phones to emerging and some of developed markets.
The company has a plan to ramp up the production of AM OLED-embedded smartphones domestically, though the chief of its phone business Shin Jong-kyun declined to comment.
“By sending most of its production outside South Korea, Samsung is managing to keep costs low enough to appeal to consumers while keeping its profit margins healthy by selling premium devices in developed markets such as North America and Western Europe,” So Hyun-chul, an analyst at Shinhan Financial, said.
Analysts and Samsung officials say the transitional efforts will help the handset powerhouse narrow the market gap with the Finland-based Nokia.
Last year, Nokia sold 431.8 million handsets worldwide, taking up 38.2 percent of the market share.
But this was a decrease of 1.6 percent from the previous year, according to research firms.
Samsung, however, saw a 3.3 percent increase to 20.1 percent during the same period.
“Samsung is injecting more resources for its smartphone-related sectors. But at the same time, it is concentrating on shipping more feature phones for bigger shares,” the company official added.
It lagged with its fewer smartphone offerings, but has vowed to attack the market aggressively in the U.S. and elsewhere.
Samsung is hoping to pick up smartphone market shares from faltering Motorola, but the U.S. company itself has been waging a comeback of sorts with its new Android handsets.
Unfortunately, it only has a 3 percent of share in the smartphone market, according to recent reports.
From 2005 to 2009, Samsung’s overall mobile phone shipments grew by 101 percent from 103.8 million units in 2005, according to BMI research.
The company expects to raise its global market share from 21 percent to around 23-24 percent. Meanwhile, Nokia’s market share is predicted to remain between 37 percent and 38 percent level in 2010.
Lee Seung-hyuck, an analyst at Woori Investment, expects Samsung will take up a record 21.5 percent of global shares in the first quarter of this year by shipping 63 million handsets during the January-March period.
Which was reviewed recently by eager Japanese as well in their Dial Vietnam For Cheap Labor [The Nikkei Asian Review June 12 edition, 2013] article:
HANOI, SEOUL, TOKYO — About 30 minutes from an international airport, one of the world’s largest consumer electronics makers has created a town in what is, despite its proximity to the airport, rural Vietnam. It is complete with restaurants, cafes and apartment buildings. And let us not forget the big production plant where the town’s 30,000 or so residents work.
While the Mekong River basin is becoming increasingly linked, Vietnam is also advancing on its own, taking advantage of its strategic location and Asia’s changing business conditions. The growth of manufacturing in Vietnam is illustrative of how labor costs in China, the world’s factory, are becoming too expensive for some global goliaths.
The company town in the Yen Phong Industrial Zone is about half an hour from Noi Bai International Airport, and perhaps a bit closer to Hanoi, the country’s capital. On a map, the three places look like the points of a triangle. The town was built by Samsung Electronics Vietnam, a unit of South Korean powerhouse Samsung Electronics Co.
This new facility in Bac Ninh Province produces many of the company’s handheld devices, such as the Galaxy S4 and Galaxy Note II, around the clock. Its output came to 120 million units last year, accounting for 30% of Samsung’s worldwide handheld shipments. This year, the number is expected to climb to 240 million units, with smartphones making up much of the increase.
Heart of the action
The global smartphone market will expand to 918 million units this year, according to estimates from U.S. research firm IDC. Samsung’s Vietnamese production base will likely supply more than 20% of this volume.
This puts the Southeast Asian nation hot on the heels of the giant economy to the north, which has been responsible for roughly half the world’s smartphone output. And Vietnam is not just where the final product is being assembled; it is also becoming a hub for electronic parts makers, mostly to feed Samsung’s smartphone production.
Samsung decided to set up shop in northern Vietnam to take advantage of the region’s low labor costs as well as its proximity to South Korea, Taiwan and China, where most key smartphone and mobile phone parts are still made.
According to Ryo Ikebe, an assistant professor who studies economic collaboration between Vietnam and China’s south at Fukui Prefectural University, the trade of integrated circuits and other electronic components between the two countries has been surging since last year.
Samsung also flies in DRAM memory chips, organic electroluminescent panels and other core components from South Korea.
A facility has been set up in the town for the sole purpose of handling Samsung’s cargo. Customs procedures, X-ray inspections and other clearance steps normally carried out at airports are done right beside the factory.
It is estimated that nearly 3,000 metric tons of Samsung products are exported from Noi Bai airport every month, accounting for 40% of all cargo leaving the airport.
To handle all the Samsung shipments, Korean Air Lines Co. lands six large cargo planes a week at the airport. Asiana Airlines Inc., another South Korean carrier, comes by three times a week. A lot of the shipments stop in South Korea on their way to Europe, the Middle East and Southeast Asia.
Ikebe believes that because Greater Hanoi is only 1,000km or so from China’s Guangdong Province, the entire region has the potential to develop into a single economic bloc, with specialized manufacturers operating symbiotically on both sides of the border.
Vietnam exported $12.7 billion worth of handsets and parts in 2012. That is double the previous year’s total and 11% of the country’s overall exports. Thanks to the surge, Vietnam recorded its first trade surplus in 19 years.
The country is about to become an even bigger smartphone production base. Nokia Corp. has decided to build its own plant in Bac Ninh. The world’s No. 2 cellphone maker could begin production there this summer.
For Japan’s electronic parts makers, Samsung has become a major client on par with Apple Inc. Inspired by the Korean giant’s big footprint in Vietnam, some Japanese companies are rushing to expand their own production in the country.
Meiko Electronics Co., a maker of printed-circuit boards, is expanding the capacity of its Hanoi factory. It will double the facility’s production capacity by bringing in equipment from China. And from fiscal 2014 onward, it will go on a Y4-5 billion ($39.6-49.5 million) per-year investment binge, all the money going into production equipment.
Toko Inc. is a midsize company that makes high-performance coils used in smartphone power circuits. It has been supplying Samsung and other companies from its factory in Da Nang, a port city in central Vietnam. Current production is 130 million units per month, up 10% from the end of last year.
Foster Electric Co., which makes the earphones that come with smartphones, is mechanizing the manufacturing of diaphragms at its factory in Vietnam.
And Panasonic Corp. last year set up a factory for multilayer printed-circuit boards in Vietnam. It sees potential in supplying the key part to Samsung.
Samsung has suppliers within the Samsung group for the components that go inside its smartphones. But the company is expected to buy even more parts from outside suppliers now that its smartphone sales are going ballistic.
Given that so many of today’s smartphone parts are feather light, Samsung can still make a tidy profit even if it flies in parts from makers based in Japan, China, South Korea and Taiwan.
That said, if the number of smartphones produced in Vietnam continues to increase, it will be cheaper to mass-produce the parts locally. Toward that end, Vietnam’s government is already busy showing foreign parts makers around the Yen Phong Industrial Zone.
— Translated from an article by Nikkei staff writers Manabu Ito, Kentaro Ogura and Yoshio Takatsuki
The trend is obvious, but Why Vietnam is the new China for the global electronics giants [whathifi.com, Feb 19, 2013]
There’s a problem with China.
It’s not the oft-rehearsed arguments about British jobs being exported there, products bearing ‘once-great’ British names being made in Chinese factories or even whole British companies falling into Chinese hands.
No, the problem with China is that it’s getting a bit too expensive for its own good, thanks to rising standards of living, the demand for production capacity there, and the growing aspirations of Chinese workers – they’re now not just making the products we all buy, but thinking of being able to buy them, too.
And that’s leading ever more companies to look for new countries in which to manufacture, with serious investments being made in the likes of Brazil – where one company is planning five new plants – and Vietnam, the target of substantial further investment from South Korea’s two consumer electronics big-hitters, LG and Samsung.
It’s one of the clichés of the modern age: products once made by proud British craftsmen in brown shop-coats and flat caps, the stub of a pencil behind one ear and a roll-up behind the other, now being put together by slave-labour Chinese teenagers working night and day for a pittance.
The truth – as in this IAG factory where Audiolab, Quad and more are made – is often far from that myth, but the fact remains that yes, Chinese wages are still much lower than in Europe or the US, for example.
20% annual wage rises
However, they have been rising, and fast – by up to 20% a year for the past half-decade.
For example Foxconn, the Taiwan-based company that’s both one of the biggest employers in China, with a million-plus-strong workforce in its 13 factories there, and one of the best-known – due to the fact it makes iPods, iPhones and iPads alongside Kindles, Wiis and PlayStations and much more – , hiked its workers’ wages by 16-25% last year.
That was just the most recent of several wage increases on a similar scale, and such rises have led some economic forecasters to suggest that China is in great danger of pricing itself out of the market, predicting that the cost of manufacturing there could double, or even treble, by the end of this decade.
Cheaper in America?
Indeed, some commentators even suggest that if the costs of shipping, and Chinese workers’ wages, continue to rise as they have, within a few years it’s going to just as cost-effective to make products in North America as in China.
Certainly the companies once looking to China for cost-effective – oh, OK then, cheap – manufacturing are casting their net wider.
Foxconn has announced that, although it’s planning more factories in China, it’s investing almost $500m in five new plants in Brazil, creating 10,000 jobs, and three more in Malaysia, to add to other operations in the Czech Republic, Hungary, Slovakia and Mexico – not to mention the joint-venture Sharp LCD plants in Japan, which it now more or less runs, and which it is expected to acquire completely at some point.
And for both LG and Samsung, Vietnam seems to be the new frontier: both companies already have plants there; both are planning significant investment and expansion in the country.
LG is already manufacturing all four of its major product lines – TVs, fridges, washing machines and air conditioners – at factories in Vietnam, but is now set to invest $300m in a new plant in Haiphong, the country’s third city.
The new facility, set to be up and running by 2020, will enable LG to integrate its existing operations in the port city, east of Hanoi, and surrounding areas, enabling it to meet growing local demand as well as having capacity for exports.
It’s also considering the manufacture of mobile phones at the facility.
The plan will see production being shifted from China to the new plants, LG citing lower labour costs and the availability of skilled workers, and the company hopes it will be sweetened by Vietnamese government incentives including reduced prices for land leases and extended exemptions from corporation tax.
Not to be outdone, Samsung already has in place plans to build at least one more plant to assemble mobile phones and other hi-tech electronics in Thai Nguyen province, north of Hanoi, and possibly a third.
It already has a factory employing 24,000 and making 11m products a month in Vietnam, and expected to export goods worth $10bn this year.
Since opening that first plant (above) in 2009, it has just about doubled output each year, although some Vietnamese commentators question whether this is giving the country a mobile phone industry, or just an assembly one for foreign investors.
One expert on the country’s mobile phone industry last year bemoaned the fact that only the plastic casework for mobile phones was actually manufactured locally, and accounted for just one percent of the value of the finished product.
Samsung’s new plant in Thai Nguyen, the land lease for which was signed a couple of weeks ago, is the subject of a $700m investment, with Samsung chairman Lee Kun Hee, seen above visiting Samsung’s existing production plant in Vietnam, saying that there are plenty of further opportunities for investment in the country.
He’s probably right – after all, economic analysts are already describing Vietnam as having the potential to become the ‘new industrial factory of the world’.
The process by which recent industrialisation started in Japan, moved to South Korea, Taiwan and the like, then on to Malaysia, Indonesia and Thailand, and has settled for now in China. will, it seems, just keep on rolling.
Writing this piece, I couldn’t help but be reminded of a press trip to the Far East many years ago, when a number of journalists were helicoptered into a factory in Thailand – one of three we visited that day owned by a Japanese company making speaker drive units.
One of our number commented on the large number of young Thai women working on the production lines, and our host, the factory boss, explained to us that they were brought in from agricultural areas all over the country.
They’d never left their rural homes before, had taken some time to adapt to the conveniences of modern living – especially the ‘conveniences’, our Japanese host stressed – and had been specially chosen for their small nimble fingers, especially suited to handling the tiny precision components used on the lines.
‘Not to mention being very, very cheap,’ muttered one of my fellow travellers…
Written by Andrew Everard