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In pursuit of development

Released at: 13:58, 01/05/2017

In pursuit of development

Photo: Viet Tuan

Mr. Hyun Woo Bang, Vice President of Samsung Vietnam, spoke candidly with VET's Duong Phong & Le Huong about the country's investment environment and industrial development strategy for "Industry 4.0" and what Samsung expects of its Vietnamese suppliers.

by Duong Phong & Le Huong

Samsung is a major brand in Vietnam, especially in electronics and mobile phones. In 2008 it selected Vietnam as the location of its mobile phone factory for exports to the world. Since then, it has continuously increased its capital and expanded its investment. Why did Samsung choose Vietnam in its development strategy?

In 2008, Samsung invested in its first mobile phone factory in Vietnam but it has been here since 1995, with a TV factory in Ho Chi Minh City. Initially, the goal of setting up the factory in Ho Chi Minh City was to meet consumer demand in Vietnam. In recent times, in line with innovative policies being introduced, Vietnam’s economy has made strong development steps and Samsung decided to invest in the mobile phone factory based on Vietnam’s many socioeconomic advantages.

The predominant advantage for Vietnam is its socio-political stability. Compared to other Southeast Asian countries, its infrastructure, such as roads, seaports and electricity network, is superior. When choosing locations to invest, a huge corporation like Samsung always pays attention to human resources. Vietnam has a large population of about 95 million people and a high proportion of young workers, which are an advantage for Samsung.

From these advantages, Vietnam is more dominant than other countries in the region so Samsung decided to choose Vietnam.

What parts of Vietnam’s business and investment environment are you dissatisfied with?

We are satisfied with most of the elements of the business and investment environment but there are still certain factors that need to be developed further. Firstly, social infrastructure needs to be further improved. Most of the existing road network has only four lanes, and we expect they will be upgraded to six or eight lanes to facilitate cargo transport and support import and export activities. Seaports and airports also need to be upgraded so they are modern and operate more efficiently.

Another change that needs to be made is in regard to legal regulations. Vietnam has recently entered into an industrialization and integration phase, so there are still many unspecified concepts that lead to confusion and that need to be supplemented in order to create more favorable conditions for business operations.

For example, the definition of coating steel is vague in Vietnam and is specified as steel used for roofing or for household electronics production. These two types of steel are totally different in essence and function and are clearly defined in the laws of other countries. As a result, when decisions are made on anti-dumping tariffs for steel, both types are in the same situation, which restricts imports.

Samsung Vietnam last year recorded impressive business results in both revenue and export turnover. Some have said that it receives too many incentives from the government. Do you have any comment to make on such statements?

Last year, despite the problem with the Samsung Galaxy Note 7, thanks to the concern of the Vietnamese Government and the trust of the Vietnamese people, Samsung overcame the resulting difficulties and recorded good business results.

There have been a number of articles in the media commenting that Samsung receives too many incentives in taxation and land. But this is not the case. The incentives Samsung has received are offered by the government to all foreign enterprises investing in Vietnam and Vietnamese enterprises investing in high-technology. Dozens of other businesses from Vietnam, Japan and the US also invest in high-technology in Vietnam.

So instead of saying the government provides too many incentives, it should be said that the government is focusing on developing high-technology for economic development.

The government has repeatedly expressed its expectations over a fourth industrial revolution (Industry 4.0) and the major role to be played by the business community. What are your thoughts on this?

Changing the global manufacturing industry through the automation of production processes, combined with virtual and physical systems, the convergence of new technologies, and the Internet of Things (IoT) is what experts expect in the fourth industrial revolution. This is also a common trend around the world.

We know that the government has been striving to promote this industrial revolution in Vietnam. The definition of what Industry 4.0 is needs to be more specific as the concept itself has a broad meaning. However, Samsung is striving to follow the development of this revolution and hopes to be able to accompany Vietnamese enterprises to implement this development strategy.

Many young Vietnamese enterprises are attempting to participate in creating technology products. Do you have any advice for them? 

High-tech requires programmability and creativity and a perception of the technological value of products for users. Young entrepreneurs need to be prepared to meet these requirements. Looking at the great characters who opened up new technology epochs, like Bill Gates and Steve Jobs, we can see that they did not directly carry out programming. More importantly, they created the concept of technological value; the emotional value of technology products to users. It should be emphasized that besides basic skills, awareness about technological value and creative skills are the most important elements. 

In developing technology products, how does Samsung carry out research and development (R&D) in Vietnam? 

Samsung now has an R&D center in Hanoi, with 1,500 employees. At its factories in Bac Ninh and Thai Nguyen provinces, Samsung has many engineers who specialize in product R&D. The R&D team in Hanoi focuses on software while the R&D teams in Thai Nguyen and Bac Ninh focus on hardware, new cycle development, and technical issues regarding the plants. Many Vietnamese engineers are capable and responsible, which helps improve product quality. 

In the years to come, with the technological revolution focusing on IoT, the development of hardware and software is of equal importance. I hope that Vietnamese engineers will make a positive contribution to Samsung’s R&D because we have seen good human resources appear from research cooperation projects with many of Vietnam’s universities. This is an important factor in helping Vietnam catch up with Industry 4.0. 

How many Vietnamese enterprises are now suppliers for Samsung? How do you evaluate the quality of these suppliers? 

Of the 180 enterprises that are first-level suppliers for Samsung, 20 are from Vietnam. We expect that by the end of this year the number of Vietnamese enterprises will increase to 29. There are also hundreds of Vietnamese enterprises that are second-level suppliers for Samsung. I know that the Vietnamese Government wants more Vietnamese enterprises to become suppliers for Samsung.

Samsung always strives not only to increase the number of Vietnamese suppliers but also to assist Vietnamese businesses in improving their efficiency and productivity. We have sent experienced Samsung experts from South Korea to directly consult and work with 14 Vietnamese companies. Under this program, the experts directly support each enterprise over a period of three months to improve production processes and meet standards in supplying products and components to Samsung’s factories in Vietnam.

However, the development of these enterprise cannot be done in as short a time as six months or one year. A first-level supplier is required to meet stringent requirements in product quality with quick delivery times. Therefore, instead of being too hasty to become a first-level supplier, many Vietnamese enterprises can become second or third-level suppliers, where they can accumulate experience and gradually become a first-level supplier. This is an effective and realistic option. 

International media has recently reported on allegations of corruption by senior figures at the Samsung Group in South Korea. Does this affect Samsung’s strategy in Vietnam? 

I don’t know much about Samsung’s global strategy and I’m not the right person to comment. Our official announcement regarding this incident was that “Samsung neither pays bribes nor makes any improper requirements seeking benefits. Proceedings in the future will reveal the truth.” 

I have found that the incident did not have any effect on Samsung’s investment plans in Vietnam. In February, Prime Minister Nguyen Xuan Phuc approved the expansion of Samsung Display’s production scale. This confirms that the incident in South Korea has not affected Samsung’s activities in Vietnam. 

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