Samsung Electronics will soon employ more local employees than any other foreign company in Vietnam. By July, the South Korean firm will have expanded their current workforce from 85,000 to 100,000. Taking account of attrition and retirement, this will involve the recruitment of 60,000 new employees from the local Vietnamese workforce.
As well as encouraging Vietnam to develop its infrastructure and workforce to meet growing demands in the high-tech sector, this latest initiative by Samsung highlights key areas of concern for investors looking to take advantage of this promising Southeast Asian manufacturing center.
Samsung’s new recruitment program reflects broader trends in Vietnam’s labor market. Demand in the manufacturing sector rose sharply last year – orders from this sector accounted for 27 percent of the total during the final quarter of 2014, representing a significant jump from 17 percent in the second and third quarters.
Samsung began its Vietnamese operations in April 2009, when it built a manufacturing plant in Bac Ninh, east of Hanoi. The company has since established a number of facilities around the country, including a factory in Thai Nguyen. Samsung now plans to construct another plant at this location as well as further upgrading production and facilities at all its locations. In its fifth annual FAST500 report, the Vietnam Report Joint Stock Company, in collaboration with VietnamNet Online, ranked Samsung Electronics as the fastest growing firm in Vietnam.
Establishing a stable workforce
Though Samsung constitutes the largest foreign direct investment in Vietnam – recently increasing this by around 40 percent to US$12 billion – the company is not the only high-tech company operating in the country. Companies such as Intel, LG, Nokia and Foxconn also have a significant presence in Vietnam.
Vietnam’s low labor costs have transformed the country into a key Asian electronics manufacturing hub and luring production away from China. However, foreign investors should be aware of the challenges still facing the manufacturing industry in Vietnam.
Many manufacturers commonly face difficulties in establishing a stable Vietnamese workforce – workers here tend to change jobs regularly, particularly around the holidays. Following Vietnam’s lunar New Year (Tết), the country’s most celebrated holiday, many workers leave their urban, industrial jobs to stay at home or in the hope of finding a better position for the year ahead.
Samsung, Panasonic, and Denso are amongst the numerous manufacturers looking to recruit after the post-Tết, labor shortage. This typically involves incentives such as sign-up bonuses, financial rewards for travel, accommodation and seniority or welfare support for those with children or elderly relatives. Notably, these post-holiday recruitment drives can represent a significant addition to overhead costs.
Average salaries and productivity
Though recent annual increases to Vietnam’s minimum wage have worried investors, the Minimum Wage Adjustment for 2014 was significantly more moderate than in recent years. The country’s minimum wage ranges from ~US$100-$150/month (VND2.15 million-3.1 million), however, the average salary in the manufacturing sector can be anywhere from US $190-230 (VND4 million- 5 million).
Minimum wages in Vietnam are determined by the region the business is located in, these are as follows:
- Region I: VND 3.1 million (US$147)
- Region II: VND 2.75 million (US$130)
- Region III: VND 2.4million (US$114)
- Region IV: VND 2.15 million (US$102)
Expanding and skilled workforce
Vietnam has made remarkable progress in its gender equality initiatives, crucial to the expansion of the country’s workforce and improving labor productivity – two imperatives needed for Vietnam’s economy to sustain steady growth as its manufacturing industry develops. Samsung’s recruitment strategy looks to take advantage of this trend – the company predominantly employs female factory workers.
Samsung is also headhunting medium and high-ranking personnel including engineers and recent graduates for executive-track placement. The first 2,500 of these new recruits are expected to join by the end of March.
Originally published as ‘Samsung Takes Advantage of Vietnam’s Developing Workforce – Expands Number of Local Employees’ on Vietnam Briefing, 16 March 2015.
Image: Justin Poulsen