Samsung to invest US$3.3 billion, produce new chip parts in Vietnam amid China’s concerns over US-led semiconductor alliance

Samsung president Roh Tae-moon discussed the new investment and other initiatives in Vietnam with Prime Minister Pham Minh Chinh last Friday
The firm is preparing trial production of its flip-chip ball grid array, used for semiconductor packaging, at its Samsung Electro-Mechanics complex

Semiconductors

Che Panin Beijing

Published: 8:30pm, 8 Aug 2022

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Samsung Electronics plans to make an additional US$3.3 billion investment in Vietnam this year, enabling the South Korean technology giant to start producing semiconductor components in the Southeast Asian country by July 2023.

That investment and various business initiatives were discussed by Samsung president Roh Tae-moon, head of the company’s MX business for mobile devices, in a meeting last Friday with Vietnamese Prime Minister Phạm Minh Chính, according to a report by local newspaper Lao Dong.

Samsung, the world’s largest memory chip maker, is preparing trial production of its flip-chip ball grid array, a surface-mount packaging technology used for integrated circuits, at the Samsung Electro-Mechanics facility in Thái Nguyên province, in the northeast region of Vietnam. Samsung also plans to establish a new research and development centre in the Vietnamese capital of Hanoi at the end of this year or in early 2023.

The latest initiatives in Vietnam reflect Samsung’s increased effort to diversify its manufacturing supply chain, even as China remains concerned over South Korea potentially joining the United States-initiated Chip 4 Alliance.

The Samsung Electro-Mechanics complex in Thái Nguyên province, in the northeast region of Vietnam. Photo: SCMP

That partnership – which the US has envisioned to include South Korea, Japan and Taiwan – threatens to exclude China from global semiconductor supply chains and to harm the country’s technology self-sufficiency drive.

South Korea is a major supplier of memory chips to China, where Samsung and SK Hynix have both made hefty investments to build and operate semiconductor foundries.

On Monday, South Korean President Yoon Suk-yeol sought to allay concerns over the country joining that US-led semiconductor alliance, vowing to give top priority to national interests in determining Seoul’s course of action.

“Relevant government agencies will study and discuss the issue in a way to preserve national interests,” Yoon said. “People don’t have to worry about it too greatly.”

South Korea plays down concerns over move to join US-led chip alliance

Yoon made the statement after Seoul reportedly informed Washington of its intention to take part in the preliminary meeting of the Chip 4 Alliance.

South Korean Foreign Minister Park Jin is also expected to make his first visit to China on Monday, as Seoul seeks to reassure Beijing about their long-standing ties.

Still, South Korea’s trade with China recorded a US$570 million deficit following shortfalls of more than US$1 billion in May and US$1.2 billion in June, according to official data released on August 1. Before May, South Korea last registered a trade deficit with China in 1994.

Assembly line workers are seen inside the Samsung Electro-Mechanics complex in Vietnam’s Thái Nguyên province. Photo: SCMP

Samsung, meanwhile, said total exports from its Vietnam operations reached US$34.3 billion in the first half of this year, up 18 per cent over the same period last year, to make up nearly 50 per cent of its 2022 export target of US$69 billion from the Southeast Asian country.

In February this year, Samsung invested US$920 million to expand its production capacity in Vietnam, where it already makes printed circuit boards, camera modules and about 50 per cent of its global smartphone output.

Samsung has gradually moved out of manufacturing in China. In 2020, Samsung halted production of personal computers at its plant in Suzhou, a city in southern Jiangsu province. In 2019, Samsung closed its last mainland smartphone factory in Huizhou, a city in southern Guangdong province.

Recently, rising geopolitical tensions and China’s rigid Covid-19 control measures have seen many multinational manufacturers on the mainland consider shifting production to other Asian countries to minimise supply chain risks.