Galaxy Note 7 axe hits Vietnam

Vietnamese exports have become dependent on Samsung. Source: Wikimedia


The impact from Samsung’s move to scrap its Galaxy Note 7 phone is spreading to Vietnam, hurting an economy already hit by drought and lower fuel prices.

Samsung, whose exports represent about a fifth of national shipments, announced this week that it would “ask all carrier and retail partners globally to stop sales and exchanges” of the handset, because “consumers’ safety remains top priority”.

“Samsung’s decision to kill off Galaxy Note 7 will certainly impact Vietnam’s exports this year,” said Nguyen Mai, chairman of Vietnam’s Association of Foreign Invested Enterprises. “Samsung has contributed greatly to Vietnam’s economy,” said Mai, estimating that the total workforce tied to Samsung in Vietnam was about 400,000, including 130,000 company staff.

The recall of 2.5 million smartphones after complaints of exploding batteries led to a US$1.1-billion fall in exports in September, according to Hanoi’s General Statistics Office.

In Vietnam, a Note 7 was selling for around US$848.

Samsung is largely responsible for turning the country into a tech-manufacturing hub almost single-handedly with US$15 billion in investment, including that from its affiliates like battery-maker Samsung SDI.

A US$2.5 billion mobile-producing factory was built in Bac Ninh and a US$5-billion plant was constructed in Thai Nguyen, another northern province. The two factories account for around 30 per cent of Samsung’s global smartphone sales, with at least one reportedly producing the new Note.

The South Korean giant is Vietnam’s largest exporter with about US$33 billion electronics exports in 2015.

Vietnam looks set to lose millions of dollars in exports while it is struggling to meet this year’s ambitious economic growth target of 6.7 per cent. The 6.8-per-cent fall in exports last month from August was due to the recall of the Note 7, said Nguyen Bich Lam of the statistics office.

“It’s another blow,” said Alan Pham of VinaCapital Group, Vietnam’s largest fund manager. “This is the risk of putting all your bets on one company or industry. But that is the natural progression of a developing country: it starts by exporting commodities then turns to manufactured products, industrial products.”

Vietnam’s growth rose to 6.4 per cent during the last quarter, from 5.78 per cent in the previous three months, the statistics office said, behind only the Philippines in Asean.