From Binary Tribune
Samsung Electronics Co. has managed to build the largest smartphone business in the world by taking advantage of the cheap and abundant workforce in China. This, however, will not last much longer, because the company is shifting its production to Vietnam. This decision was prompted by the fact that Vietnam offers even cheaper workforce, which will allow Samsung to defend its profit margins even when the sales’ growth of high-class handsets slows.
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By 2015, when the new plant is expected to reach its full production capacity, Vietnam will be producing more than 40% of phones, which generate the majority of Samsung’s operating profit. This is the reason why the company is shifting to its new 2-billion-dollar plant. Samsung managed to reach to the top of the mobile-phone industry thanks to the fact it offers innovative devices at reasonable prices, which helped it surpass Apple Inc. However, in order to be able to keep the prices low, especially when its Chinese rivals drive prices even lower, Samsung is forced to shift a part of its business in Vietnam, where wages are estimated to about one-third of the ones in China.
The new foreign direct investment projects that have been approved by the Vietnamese government are estimated at 13.8 billion dollars, which is 73% up compared to the ones approved only a year earlier.
By 2015, Samsung’s new plant is expected to manufacture 120 million handsets annually. The company however is still keeping these matters privately and refused to comment when asked for clarification. Some analysts expect that it may eventually produce as many as 80% of its phones in the Vietnam-based plant.
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