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Is Vietnam’s economy too dependent on Samsung?

VietNamNet Bridge - The slowdown in demand for mobile phones may affect Samsung's operations in Vietnam, which could affect the domestic economy. 
VietNamNet Bridge - The slowdown in demand for mobile phones may affect Samsung's operations in Vietnam, which could affect the domestic economy. 


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International press reports say that Samsung is feeling pressure from the strong rise of Huawei, which once again surpassed Apple in Q3 and was the second largest smartphone supplier in the world for the second consecutive quarter. Huawei has nearly caught up with Samsung.

Meanwhile, Samsung’s operation in Vietnam continues to play a very important role in the economy. It made up 6.1 percent of total FDI in Vietnam over the last 10 years, having invested $17 billion so far.

With exports accounting for 28 percent of Vietnam’s total exports, the South Korean electronics giant has helped Vietnam become the second largest smartphone export country in the world.

Mobile phone manufacturing and electronics make up 18.8 percent of Vietnam’s GDP with an annual growth rate of 18 percent. The importance of Samsung could be seen when the GDP dropped sharply to 5.1 percent in Q1 2017 just because of Samsung’s decrease in Galaxy Note 7 sales.

SSI (the Saigon Securities Incorporated), in its recently released report about the economy in the first 11 months, commented that Vietnam had a favorable beginning in early 2018. 

The economy would have taken off if there had not been an ‘adverse wind’ – the decline in Samsung’s output and the China-US trade war. 

The electronics industry gained a two-digit growth rate in the first 11 months, but it is on the decrease. SSI commented that the electronics industry is likely to be an obstacle for growth next year.

The electronics industry gained a two-digit growth rate in the first 11 months, but it is on the decrease. SSI commented that the electronics industry is likely to be an obstacle for growth next year.

The industry hopes to see Vietnamese newcomers and new phone assembling factories in Vietnam that would replace those in China.

However, SSI warned that the heavy reliance on smartphones will pose high risks for economic growth.
 
The industrial production growth in the fourth quarter will be lower than the third quarter while mining would continue a minus growth circle. 

Since industry is the major force for economic growth, the GDP growth rate in Q4 is expected to be the lowest in the year.

Meanwhile, Marc Djandji from Viet Dragon Securities said that while Samsung’s revenue this year is lower than last year because of saturation of the mobile phone market, Vietnam’s GDP could grow in other fields, including seafood, textiles and garments because of the US-China trade war.

He noted that the government of Vietnam is laying down policies to stimulate the development of other industries in an effort to ease reliance on large foreign corporations such as Samsung and Formosa.


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