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Tech Firms Flock to Vietnam
The Wallstreet Journal
Global Names Accelerate One of the Developing World's Fastest Transformations Ever
By
JAMES HOOKWAY
Sept. 27, 2013 12:39 a.m. ET
Vietnam is becoming one of the largest offshore production bases for Samsung's Galaxy smartphones and tablets. The WSJ's James Hookway looks at how the Korean electronics giant, which now accounts for more than 10% of Vietnam's exports, is transforming Hanoi.
BAC NINH, Vietnam—Opening a Korean restaurant among the rice fields and limestone karsts north of Hanoi might seem a risky business, but Le Thi Huyen is doing a roaring trade at her bistro here.
The reason? Samsung Electronics Co. 005930.SE +0.54% is building up Vietnam as one of the South Korean company's largest offshore production bases, churning out billions of dollars worth of its popular Galaxy series of smartphones and tablets. And Samsung's engineers and managers are hungry for bulgogi, bibimbap and other tastes of home.
LG Electronics Inc.,066570.SE -0.29% U.S.-based Intel Corp.INTC +0.52% and Taiwan-based Foxconn Technology Co. 2354.TW -0.27% also are stepping up investments and helping to accelerate one of the developing world's fastest economic transformations ever, as Vietnam's shipments of smartphones and computer parts begin to overtake exports of coffee, garments and shrimp.
Consulting firm McKinsey & Co. says this Communist-run corner of the global economy could benefit from how industrialization often happens faster today than it did in the past, especially in high-technology businesses, where new trends quickly set root and leapfrog older ways of doing things. While Japanese companies took 40 years to climb to the top of the global value chain, South Korean companies took only 30 years, McKinsey says. Chinese companies, such as Huawei Technologies Co. achieved the same feat in 20 years.
Deepak Mishra, until recently the World Bank's lead economist in Vietnam, says some experts "argue that Vietnam's manufacturing sector is perhaps at the stage where China was in the late 1990s, when high-tech exports suddenly took off." And it isn't just on the hardware side. New tech startups are turning Vietnam into a player on the Asian software development scene, while the computer skills of its high-school students wowed a seasoned Google Inc. GOOG -0.02% engineer.
Some economists say that despite the trickle-down effects of workers shifting from agriculture to higher-paying factory jobs, the broader economic impact of booming investment figures isn't clear. Samsung, which declined to comment for this article, and other manufacturers largely assemble products from components made elsewhere.
"I'm not sure Vietnam is really adding value from this just yet," says Tim Condon, Asia-Pacific economist at ING in Singapore.
Vietnamese officials credit the wave of foreign investments for helping to keep the economy afloat after a decadelong credit boom popped in 2010, triggering currency devaluations that sent inflation rates above 20%. Officials are laying out the welcome mat for more investors. Thai Nguyen province outbid other parts of the country to persuade Samsung to build its third plant there, offering up to 16 years of tax breaks.
And Prime Minister Nguyen Tan Dung is focused on bringing in investors from Japan and elsewhere to help upgrade Vietnam's infrastructure to enable its technology sector to grow. "We're aiming for top quality investments," he said in a written response to questions.
The mushrooming of domestic tech startups, meanwhile, suggests that making smartphones could just be one sign of a broader shift toward developing technology-related industries in Vietnam, where the median age of its 92 million people is a youthful 26.
In Southeast Asia this year, only Singapore has a better record of tech entrepreneurs starting companies and then successfully selling stakes to outside investors, according to Hanoi-based startup incubator Topica. Hanoi-based Emobi Games JSC released a videogame world-wide based on Ho Chi Minh's famous victory over French colonists at the battle of Dien Bien Phu in 1954.
Some companies are doing better still. FPT Corp. is among the world's top-100 companies in technology outsourcing, with annual revenue of more than $1 billion.
Others aren't faring quite so well. A government-started social-media site designed to draw users away from Facebook Inc. FB -3.31% 's service hasn't taken off, and firms such as Google and Yahoo Inc. YHOO +0.31% complain that government restrictions on what can be said on the Internet has chilled the growth of e-commerce in the country. Thirty-five bloggers are in prison in Vietnam, the highest number in the world after China.
Yet the renewed focus that many Vietnamese schools are placing on computer science suggests there could be better news in the pipeline.
Neil Fraser, a software engineer at Google, recently visited Vietnam on vacation and marveled at the technological skills displayed by computer science students at a school in Danang, in central Vietnam. Fifth-grade students, he says, were performing at the level of 11th graders in the U.S., while he estimated that around half of the Vietnamese 11th-graders could pass the Google interview test.
"To say I was impressed is an understatement," Mr. Fraser says.
He spent some of his vacation writing educational software for the school, and then when to an ATM to withdraw enough money to cover the annual salary for an additional computer-science teacher. The amount spoke volumes about Vietnam's appeal: $1,200.
—Nguyen Anh Thu in Hanoi contributed to this article.
Write to James Hookway at james.hookway@wsj.com
http://online.wsj.com/news/articles/SB10001424052702303796404579100200896926512
The Wallstreet Journal
Global Names Accelerate One of the Developing World's Fastest Transformations Ever
By
JAMES HOOKWAY
Sept. 27, 2013 12:39 a.m. ET
Vietnam is becoming one of the largest offshore production bases for Samsung's Galaxy smartphones and tablets. The WSJ's James Hookway looks at how the Korean electronics giant, which now accounts for more than 10% of Vietnam's exports, is transforming Hanoi.
BAC NINH, Vietnam—Opening a Korean restaurant among the rice fields and limestone karsts north of Hanoi might seem a risky business, but Le Thi Huyen is doing a roaring trade at her bistro here.
The reason? Samsung Electronics Co. 005930.SE +0.54% is building up Vietnam as one of the South Korean company's largest offshore production bases, churning out billions of dollars worth of its popular Galaxy series of smartphones and tablets. And Samsung's engineers and managers are hungry for bulgogi, bibimbap and other tastes of home.
LG Electronics Inc.,066570.SE -0.29% U.S.-based Intel Corp.INTC +0.52% and Taiwan-based Foxconn Technology Co. 2354.TW -0.27% also are stepping up investments and helping to accelerate one of the developing world's fastest economic transformations ever, as Vietnam's shipments of smartphones and computer parts begin to overtake exports of coffee, garments and shrimp.
Consulting firm McKinsey & Co. says this Communist-run corner of the global economy could benefit from how industrialization often happens faster today than it did in the past, especially in high-technology businesses, where new trends quickly set root and leapfrog older ways of doing things. While Japanese companies took 40 years to climb to the top of the global value chain, South Korean companies took only 30 years, McKinsey says. Chinese companies, such as Huawei Technologies Co. achieved the same feat in 20 years.
Deepak Mishra, until recently the World Bank's lead economist in Vietnam, says some experts "argue that Vietnam's manufacturing sector is perhaps at the stage where China was in the late 1990s, when high-tech exports suddenly took off." And it isn't just on the hardware side. New tech startups are turning Vietnam into a player on the Asian software development scene, while the computer skills of its high-school students wowed a seasoned Google Inc. GOOG -0.02% engineer.
Some economists say that despite the trickle-down effects of workers shifting from agriculture to higher-paying factory jobs, the broader economic impact of booming investment figures isn't clear. Samsung, which declined to comment for this article, and other manufacturers largely assemble products from components made elsewhere.
"I'm not sure Vietnam is really adding value from this just yet," says Tim Condon, Asia-Pacific economist at ING in Singapore.
Vietnamese officials credit the wave of foreign investments for helping to keep the economy afloat after a decadelong credit boom popped in 2010, triggering currency devaluations that sent inflation rates above 20%. Officials are laying out the welcome mat for more investors. Thai Nguyen province outbid other parts of the country to persuade Samsung to build its third plant there, offering up to 16 years of tax breaks.
And Prime Minister Nguyen Tan Dung is focused on bringing in investors from Japan and elsewhere to help upgrade Vietnam's infrastructure to enable its technology sector to grow. "We're aiming for top quality investments," he said in a written response to questions.
The mushrooming of domestic tech startups, meanwhile, suggests that making smartphones could just be one sign of a broader shift toward developing technology-related industries in Vietnam, where the median age of its 92 million people is a youthful 26.
In Southeast Asia this year, only Singapore has a better record of tech entrepreneurs starting companies and then successfully selling stakes to outside investors, according to Hanoi-based startup incubator Topica. Hanoi-based Emobi Games JSC released a videogame world-wide based on Ho Chi Minh's famous victory over French colonists at the battle of Dien Bien Phu in 1954.
Some companies are doing better still. FPT Corp. is among the world's top-100 companies in technology outsourcing, with annual revenue of more than $1 billion.
Others aren't faring quite so well. A government-started social-media site designed to draw users away from Facebook Inc. FB -3.31% 's service hasn't taken off, and firms such as Google and Yahoo Inc. YHOO +0.31% complain that government restrictions on what can be said on the Internet has chilled the growth of e-commerce in the country. Thirty-five bloggers are in prison in Vietnam, the highest number in the world after China.
Yet the renewed focus that many Vietnamese schools are placing on computer science suggests there could be better news in the pipeline.
Neil Fraser, a software engineer at Google, recently visited Vietnam on vacation and marveled at the technological skills displayed by computer science students at a school in Danang, in central Vietnam. Fifth-grade students, he says, were performing at the level of 11th graders in the U.S., while he estimated that around half of the Vietnamese 11th-graders could pass the Google interview test.
"To say I was impressed is an understatement," Mr. Fraser says.
He spent some of his vacation writing educational software for the school, and then when to an ATM to withdraw enough money to cover the annual salary for an additional computer-science teacher. The amount spoke volumes about Vietnam's appeal: $1,200.
—Nguyen Anh Thu in Hanoi contributed to this article.
Write to James Hookway at james.hookway@wsj.com
http://online.wsj.com/news/articles/SB10001424052702303796404579100200896926512
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