Vietnam welcomes LG's premium phone plant

The Korea Times

The Korea Times

Business

Sun, October 1, 2023 | 05:13

Tech

Vietnam welcomes LG's premium phone plant

Posted : 2019-05-29 15:49

Updated : 2019-05-31 17:32

By Baek Byung-yeul

LG Electronics has been drawing an enthusiastic response from Vietnam as government officials and jobseekers there are welcoming its recent decision to move high-priced smartphone production lines from Korea to the Vietnamese city of Hai Phong, company officials said Tuesday.

"The Vietnamese people have welcomed the news as they expect that producing premium smartphones in the country's third-largest city signals that more investment could come," an LG spokesman said. "While we have produced budget and midrange smartphones and other home appliances at the Hai Phong factory, we decided to produce premium smartphones there as well starting the second half of 2019. We expect this will improve the profitability of the firm's smartphone business."

The spokesman said Hai Phong will be one of the largest production base for the firm as LG will invest $1.5 billion in the city from 2013 through 2028. In addition, LG Group's component-producing arm LG Innotek will also invest $500 million there to expand its camera module production factory.

Given the city has geographical advantages as it is located only 90 kilometers north of the capital Hanoi and is close to the South China Sea, industry officials said the Hai Phong plant will help LG improve competitiveness in its struggling smartphone business.

LG's decision to shut down its smartphone factory in Korea also sheds light on LG Group Chairman Koo Kwang-mo's bold initiative to beef up the firm's smartphone capabilities. LG has been criticized for its slow and bureaucratic decision-making but has been showing bold moves under the leadership of the fourth-generation leader, they said.

They added LG should have made the relocation decision earlier because the firm would have achieved price competitiveness from cheap labor there and could invested more in R&D, making it more competitive.

The firm has produced 5 million premium smartphones such as the G and V series in Pyeongtaek, Gyeonggi Province a year, but recently said it will phase out the Pyeongtaek factory by the end of 2019 and shift production to Hai Phong.

LG has produced 6 million budget and midrange smartphones annually in Hai Phong since 2014. Once the relocation of the manufacturing site is completed, the Hai Phong factory will have an annual production capacity of 11 million.

Hai Phong has been attracting foreign investment by providing tax exemption for four years. The city also has a major advantage in terms of labor cost as the minimum monthly wage is $184, much cheaper than Shanghai ($365.60) and Jakarta ($256.10), according to data from the Korea Trade-Investment Promotion Agency.

Thanks to this policy, U.K.-based property service provider Savills said Haiphong has seen an increasing number of foreigners as 7.8 million visited the city in 2018, a 12 percent increase year-on-year. It added the visitors include a large number of business visitors who played a very important role in increasing revenue for hotels and apartments there.

A real estate broker who specializes in the Hai Phong region said it has been receiving increasing inquiries for apartments, offices and stores from Korean investors.

"The city has become a popular investment destination among Korean investors. This is mainly because of LG. We expect there will be more inquiries seeking investment opportunities as LG is shifting its phone manufacturing lines," the broker said.

baekby@koreatimes.co.kr