Samsung, LG Both Embracing Vietnam as R&D Hub

Vietnam, to which President Yoon Suk-yeol will pay a three-day state visit beginning June 22, has become a center of research and development (R&D) for Samsung and LG for the future, becoming more than a global production outpost for them.

Samsung posted sales of US$73.7 billion (about 95.3678 trillion won) in Vietnam in 2022. Its exports from Vietnam were valued at US$65 billion, accounting for 18 percent of the Southeast Asian country’s total exports. This means that Vietnam has become a key production base for Samsung’s global exports.

In particular, Samsung Electronics affiliates have been particularly active in Vietnam. They include Samsung Display, Samsung Electro-Mechanics, Samsung SDI, and Samsung SDS. They operate six production subsidiaries and one sales subsidiary in Bac Ninh, Thai Nguyen, Ho Chi Minh City, and Hanoi.

Samsung smartphones are produced in Vietnam. They include both budget models and high-priced foldable phones. The Korean tech giant also makes not only home appliances such as TVs and refrigerators but 5G communication equipment, displays, batteries, and camera modules in Vietnam.

Samsung employs more than 100,000 people in the country. Its cumulative investment has reached US$20 billion (25.88 trillion won). “Vietnam is a global production base where Samsung’s major products are mass-produced,” a Samsung official said.

In 2022, LG made 15 percent of its global sets and parts in the Hai Phong cluster, which is home to production subsidiaries of LG Electronics, LG Display, and LG Innotek.

As of April, LG had about 24,000 employees and its annual production volume had grown to US$12 billion, which accounts for 3 percent of Vietnam’s gross domestic product (GDP).

Samsung and LG, in particular, are expanding their investment in research and development (R&D). In March, LG upgraded its Vietnam-based VS R&D center to an official subsidiary. The center is responsible for software development and verifies automotive infotainment systems. The company plans to increase the number of development personnel at the VS Vietnam R&D Center by more than 30 percent by next year, to 1,000 from the current 750.

Samsung built an R&D center in the capital city of Hanoi in December 2022. The 16-story edifice with three basement floors houses 2,200 researchers who develop mobile handsets, networks, and software. The building cost US$220 million and employs an average of 1,300 workers a day, even during the COVID-19 pandemic.

Other Samsung affiliates also have presences in Vietnam. Samsung Life Insurance made a foray into Vietnam in 2008, Samsung Fire & Marine in 2002, Cheil Communications in 2011, Samsung C&T’s Construction Division in 2013, Samsung C&T’s Fashion Division in 2014, Hotel Shilla in 2014, Samsung Welstory in 2015, and Samsung S-1 in 2017.

LG affiliates have also appeared in the country, including LG Chem and LG Household and Health Care, which produce engineering plastics (EP) and display materials for information technology (IT) products and home appliances. They also sell general chemical products such as polyvinyl chloride (PVC) and polyethylene (PE) and cosmetics and household products in Hai Phong and Ho Chi Minh City, among others.

Hyundai Motor Group is also actively carrying out business activities in the growing Vietnamese market. After establishing a production joint venture, HTMV, with Vietnam’s Thanh Cong Group in 2017 and a sales joint venture, HTV, in 2021, Hyundai completed its second HTMV plant in 2022. This year, SK Group purchased a 16.3 percent stake in VinCommerce, a distribution subsidiary of Vietnam’s largest food, beverage, and retail company, Masan Group, and made an investment in Masan Group’s distribution holding company, CrownX.

Yoon’s visit is being accompanied by a 205-member economic delegation, the largest under the current administration, because of Vietnam’s significant market value. Bilateral trade between Korea and Vietnam has grown 161 times in the 30 years since 1992, with trade volume reaching a record high of US$87.7 billion in 2022. In 2022, Korea had the largest trade surplus with Vietnam at US$34.3 billion.