SEOUL: When Samsung Electronics chairman Jay Y. Lee met Vietnam\u2019s prime minister in July, he had a simple message to convey.<\/p>\n\n\n\n
\u201cVietnam\u2019s success is Samsung\u2019s success, and Vietnam\u2019s development is Samsung\u2019s development,\u201d Lee told Pham Minh Chinh, pledging long-term investment to make the country its biggest manufacturing base for display products.<\/p>\n\n\n\n
Since the South Korean conglomerate entered Vietnam in 1989, it has poured billions of dollars into expanding its global manufacturing footprint beyond China. Many of its peers followed after US President Donald Trump placed tariffs on Chinese goods in his first term.<\/p>\n\n\n\n
The pioneering move has made Samsung Vietnam\u2019s biggest foreign investor and exporter.<\/p>\n\n\n\n
About 60 per cent of the 220 million phones Samsung sells each year globally are made in Vietnam, and many are destined for the US, where Samsung is the No. 2 smartphone vendor, according to research firm Counterpoint.<\/p>\n\n\n\n
Now, that reliance on Vietnam threatens to backfire as Hanoi is racing to negotiate with the Trump administration to lower a punishing potential 46 per cent tariff that has exposed the vulnerability of the Southeast Asian country\u2019s export model.<\/p>\n\n\n\n
While Vietnam and Samsung won a reprieve this week after Trump paused the rate at 10 per cent for 90 days, Reuters interviews with more than a dozen people, including at Samsung and its suppliers, show the company would be a primary victim should higher US tariffs take effect in July.<\/p>\n\n\n\n
\u201cVietnam is where we produce most of our smartphones, but the tariffs (initially) came out much higher than expected for the country, so there\u2019s a sense of confusion internally,\u201d said a Samsung executive, who like some others was granted anonymity to discuss a sensitive subject.<\/p>\n\n\n\n
Even if the two countries reach an agreement, Vietnam\u2019s roughly $120 billion trade surplus with the US has put it in the sights of a US administration targeting such imbalances. Hanoi hopes to get the duties reduced to a range of 22 per cent to 28 per cent, if not lower, Reuters has reported.<\/p>\n\n\n\n
Amid the uncertainty, Samsung and its suppliers are considering adjusting production, said four people familiar with the matter. That could involve increasing output in India or South Korea, though such steps would be costly and time-consuming, they said.<\/p>\n\n\n\n
Wall Street ended a turbulent week with solid gains on Friday, with the Dow adding more than 1.5 per cent, the S&P 500 rising 1.8 per cent and the Nasdaq climbing 2 per cent.<\/p>\n\n\n\n
Samsung declined to comment about how it is navigating the tariff threat. It has said previously it would respond flexibly to US tariffs with its global supply chain and manufacturing footprints.<\/p>\n\n\n\n
Vietnam\u2019s foreign and industry ministries also didn\u2019t reply to requests for comment.<\/p>\n\n\n\n
Samsung\u2019s rival Apple faces an even bigger challenge at least in the short term, as Trump\u2019s tariffs on Chinese imports have increased to 145 per cent. Apple imports around 80 per cent of iPhones sold in the US from China, according to Counterpoint. Apple didn\u2019t reply to a request for comment.<\/p>\n\n\n\n
The tariff fear is the latest cloud over the manufacturing landscape in Vietnam, which had become a popular destination for companies looking to diversify amid China-US tensions.<\/p>\n\n\n\n
But the boom has contributed to power supply problems. Vietnam has also increased its effective tax rate on large multinationals in line with OECD-led global standards, which some companies complained came without adequate compensation for the loss of earlier tax incentives.<\/p>\n\n\n\n
Further, the influx of foreign companies tightened supply of skilled workers and increased wage costs, according to several South Korean firms based in Vietnam. One person described the situation as \u201cvery serious\u201d.<\/p>\n\n\n\n
Mounting pressures could cost Vietnam investment appeal relative to other countries, according to some economists.<\/p>\n\n\n\n
\u201cVietnam\u2019s loss could be India\u2019s gain,\u201d Nomura economists said in a note.<\/p>\n\n\n\n
India wants to move quickly on a trade deal with the US, a government official said on April 10. The two countries agreed in February to work on the first phase of a deal to be concluded late this year.<\/p>\n\n\n\n
Vietnam has already made concessions to the US, including increasing imports. It was among the first countries to announce the start of trade talks with the Trump administration after the moratorium on \u201creciprocal\u201d tariffs.<\/p>\n\n\n\n
But foreign manufacturers are nervous.<\/p>\n\n\n\n
Ko Tae-yeon, chairman of Korea Chamber of Business in Vietnam, said that initially there was \u201cpanic\u201d about Trump\u2019s tariffs.<\/p>\n\n\n\n
Some had made plans to cut staff at local factories, he said, without specifying. In light of Trump\u2019s pause, companies were now in \u201cwait and see mode\u201d, added Ko, who is director general of Heesung Electronics, a supplier of LG Display.<\/p>\n\n\n\n
Samsung has not made a decision on how to respond to the Vietnam tariffs given Trump\u2019s changing approach, but one option is to produce some US-bound smartphone models at its factory in the South Korean city of Gumi, two of the people said.<\/p>\n\n\n\n
Four people said Samsung could boost production in India but it would first need to expand its smartphone supply chain there, as India can currently handle only around 20 per cent of Samsung\u2019s total output.<\/p>\n\n\n\n
BMI Research, a subsidiary of Fitch Solutions, estimates that electronics products account for roughly 45 per cent of Vietnam\u2019s exports to the US and major producers like Samsung would likely reduce production in anticipation of a decline in demand.<\/p>\n\n\n\n
Samsung also makes TVs, home appliances and device screens in Vietnam. Its exports amounted to around $54 billion last year, around 15 per cent of Vietnam\u2019s total, government estimates show.<\/p>\n\n\n\n
As Samsung weighs its options, worries are rippling through factory floors.<\/p>\n\n\n\n
\u201cI am afraid they may cut everything,\u201d said Nguyen Thi Hao, a 39-year-old worker at a Samsung plant in Thai Nguyen, north of Hanoi.<\/p>\n","protected":false},"excerpt":{"rendered":"
SEOUL: When Samsung Electronics chairman Jay Y. Lee met Vietnam\u2019s prime minister in July, he had a simple message to convey. \u201cVietnam\u2019s success is Samsung\u2019s success, and Vietnam\u2019s development is Samsung\u2019s development,\u201d Lee told Pham Minh Chinh, pledging long-term investment to make the country its biggest manufacturing base for display products. Since the South Korean conglomerate […]<\/p>\n","protected":false},"author":1,"featured_media":3824,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"pagelayer_contact_templates":[],"_pagelayer_content":"","inline_featured_image":false,"rop_custom_images_group":[],"rop_custom_messages_group":[],"rop_publish_now":"initial","rop_publish_now_accounts":{"facebook_3859443944190656_798604363342440":""},"rop_publish_now_history":[],"rop_publish_now_status":"pending","footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[2],"tags":[],"class_list":["post-3823","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-sci-tech"],"jetpack_publicize_connections":[],"_links":{"self":[{"href":"https:\/\/pakjazbo.com\/index.php?rest_route=\/wp\/v2\/posts\/3823","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/pakjazbo.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/pakjazbo.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/pakjazbo.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/pakjazbo.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=3823"}],"version-history":[{"count":1,"href":"https:\/\/pakjazbo.com\/index.php?rest_route=\/wp\/v2\/posts\/3823\/revisions"}],"predecessor-version":[{"id":3825,"href":"https:\/\/pakjazbo.com\/index.php?rest_route=\/wp\/v2\/posts\/3823\/revisions\/3825"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/pakjazbo.com\/index.php?rest_route=\/wp\/v2\/media\/3824"}],"wp:attachment":[{"href":"https:\/\/pakjazbo.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=3823"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/pakjazbo.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=3823"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/pakjazbo.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=3823"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}