“Samsung Electronics is considering building plants to produce white goods in Myanmar as the company has been seeking new manufacturing posts to cut labor costs and improve efficiency,” sources told The Korea Times, Monday.
It is negotiating on key conditions with the Southeast Asian country.
“Investment will occur in a few years,” one said. “Looking at the big picture, Samsung, as a global company, intends to find the next China and Vietnam. If conditions are met, then the country will be the company’s next manufacturing hub.”
Samsung operates huge semiconductor and display plants in Korea, China, the United States and Vietnam.
In Vietnam, Samsung is teaming with parts affiliates such as Samsung Display and Samsung Electro-Mechanics to step up its investment in mobile phones. In China, it operates cutting-edge semiconductor and display plants in Xi’an and Suzhou, respectively.
There are no production facilities in Myanmar as Samsung runs marketing branches under a Thai Samsung subsidiary. In January 2013, Samsung Electronics won approval from the Myanmar Investment Commission to establish a factory near the country’s capital, Yangon, but the plant was put on hold.
“Samsung Electronics wants guarantees about greater land availability, with more benefits and power supply, before making an investment in that country,” a local diplomatic source said. “The key issue is how to reach a consensus about administrative-related issues.”
The foreign investment law Myanmar passed in 2012 set off a wave of interest in the country. The law allows for 100 percent foreign ownership in non-restricted sectors and an increase in land lease duration.
It also grants foreign investors corporate income tax exemptions for three years at a minimum, and exemption from, or a reduction of, taxes on imported capital goods and raw materials. This is not quite as competitive as an offer from Vietnam in return for Samsung investing billions of dollars.
The International Monetary Fund has branded Myanmar Asia’s “final frontier.”
The country had a population of about 62 million in 2012 and its GDP per capita is growing at 7 to 8 percent annually. In terms of a consumer market, the country looks attractive, offering potential for suppliers of basic goods, according to market research firms.
“About 75 percent of Myanmar’s workforce is employed in the conventional agricultural sector,” sources said. “A Samsung investment, if it materializes, will be a blessing to the country.”
Lowering labor costs has emerged as one of the main issues for Samsung Electronics to better compete with its chief overseas rivals such as Chinese electronics firms.
Samsung Electronics is the global leader in consumer items and components. But as a new order prevails in the global consumer electronics industry, with companies stressing the development of highly competitive goods with better pricing,
Samsung’s answer about how to effectively manage rising labor costs is to choose new destinations, said experts.
Source: The Korea Times