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CASE STUDY 3: Samsung Electronics Viet Nam (SEV)
CASE STUDY 3: Samsung Electronics Viet Nam (SEV)
Samsung reports a “localization ratio” of 57 per cent in Viet Nam, i.e. all value added
retained locally (including profits retained for reinvestment). Local content in the more
usual sense of the value of local goods and services as a percentage of total value added
is 40 per cent (according to Samsung) and closer to 30 per cent (according to
Vietnamese officials).
In 2014, only ten Vietnamese domestic firms were suppliers, and the four first-tier
suppliers among them provided paper packaging products. The 63 other first-tier
suppliers in Viet Nam were from the Republic of Korea (53), Japan (7), Malaysia (1),
Singapore (1) and the UK (1). Samsung reported in 2017 that the number of
Vietnamese suppliers had increased to 215, of which 25 were first-tier suppliers while
the others were second-tier suppliers. They were providing either services (e.g. meal
catering, recreational travel, and cleaning and sanitation) or paper packaging products,
which did not enter into the assembly and manufacturing of Samsung’s actual final
products.
Since 2014, in collaboration with the Vietnamese government, Samsung has held an
annual workshop known as the Samsung Sourcing Fair. The first workshop was
attended by over 200 domestic suppliers responding to Samsung’s plan to source 91
parts locally, but upon assessment, Samsung found that none of the participants could
meet its requirements. Since 2015, Samsung has also offered a three-month technical
consultation programme, in which experts from the Republic of Korea are deployed
to Vietnamese firms to help improve manufacturing processes. At the end of 2017,
Samsung had 26 firms enrolled in the programme and estimated large productivity
gains and a reduction in defects from the participating firms. However, the numbers
are small, and Samsung has emphasized that firms like itself cannot be expected to
spend large sums to meet inadequacies in the domestic supply base. An alternative
solution is for domestic firms to identify roles as second-tier suppliers, and for the
first-tier suppliers to help them improve their capabilities.
https://www.unido.org/sites/default/files/files/2018-06/EBOOK_GVC.pdf