Ties strengthen as Samsung mentors local vendors

In a bid to promote local sourcing and supply chain fluidity, Samsung assists its suppliers - Photo: Thanh Tung

Han Myoungsup, president of Samsung Complex Vietnam, expects Samsung to offer mentoring to 12 additional Vietnamese enterprises in 2017. The enterprises receiving mentoring may become new suppliers for the group, Myoungsup said.

With Samsung increasing its efforts to seek out Vietnamese vendors, the number of local firms engaged in the group’s supply chain has “increased dramatically, with 198 vendors in total, including 20 tier-one vendors and 178 tier-two vendors now participating,” Myoungsup said during a Samsung Vietnam management board visit to five Vietnamese vendors in mid-January.

The vendors are joining the supply chain for Samsung’s three existing plants in Vietnam – Samsung Electronics Vietnam ($2.5 billion) in the northern province of Bac Ninh, Samsung Electronics Vietnam Thai Nguyen ($5 billion) in the northern province of Thai Nguyen, and SEHC Complex ($2 billion) in Ho Chi Minh City. It is expected that Samsung’s tier-one vendors in Vietnam will increase to a total of 29 in 2017. Samsung Vietnam also increased its supply rate for locally produced products from 35 per cent in 2014 to 51 per cent in 2016.

“Through Samsung’s supporting programmes, Vietnamese enterprises could gain the knowledge and experience required to enhance their capacity. Samsung believes that if a product can be produced locally, we will seek to maximise its localised content,” Myoungsup said.

Hoang Anh Tuan, president of Viet Hung Plastic Company - one of the firms receiving mentoring from Samsung - told VIR that his firm provides products to many South Korean and Japanese firms, including Samsung. But Samsung currently accounts for over 50 per cent of Viet Hung’s total revenue, which eclipses VND2 trillion ($91 million) last year, Tuan said.

“We have been a vendor for Samsung for nearly 10 years,” he said. “Last year, we invested about $50 million into expanding production in Ho Chi Minh City. It is expected that our revenue from Samsung will continue to grow this year. We forecast a total growth rate of over 10 per cent.”

According to Samsung, Viet Hung is an outstanding tier-one vendor in the group’s supply chain. This is the second time Viet Hung has received mentoring for plastic component production for mobile phones and tablets.

As a result of the mentoring, Viet Hung’s production error rate has decreased to 0.6 per cent from 1.7 per cent. The product performance indicator also hit 100 per cent, plastic quality improved 100 per cent, and line productivity rose 73 per cent.

In another example, tier-two vendor An Lap Plastic Co., Ltd. also provides Samsung with plastic components. However, this is the first time An Lap has received direct support from Samsung. After three months of mentoring, An Lap’s error rate has fallen 96 per cent, machine efficiency has improved 100 per cent, and inventory costs have fallen 31 per cent.

Samsung has extensive experience mentoring firms and cultivating localised supply chains for its products, having previously developed localised supply chains within South Korea.

“I do believe that Vietnamese firms will be able to well compete with other foreign suppliers in the very near future. Previously, Samsung’s vendors were mostly foreign firms. However, South Korean firms soon replaced the foreign rivals and became Samsung’s partners,” Myoungsup said.

With an export turnover of over $37 billion in 2016, Samsung Electronics accounted for 20 per cent of Vietnam’s total exports. This year, the firm has set a target export turnover growth rate of 7-10 per cent.

“Samsung aims to not only turn Vietnam into the world’s smartphone and electronic appliance production base, but also create more opportunities for Vietnamese enterprises to get involved in Samsung’s global supply chain,” Myoungsup said.