Samsung Electronics share price down, to build a $560-million appliance plant in Vietnam

Samsung Electronics Co. Ltd announced its intentions to build a $560-million factory in Vietnams Ho Chi Minh City as part of its strategy to expand production in the country, benefiting from its cheap labor costs.

The 700 000-square-meter complex, where Samsung will manufacture TVs and other home appliances, will be used to meet mid- and long-term demand for consumer electronics globally, including emerging markets. It will employ between 4 000 and 5 000 people and production is expected to begin in 2016.

“Vietnam is a strategic player in Samsung’s global supply chain,” the company said. The worlds largest phone maker already has two major mobile-phone factories in Vietnam, in which it has invested $4.5 billion.

Samsung, which is also the worlds largest manufacturer of TVs and memory chips, secured an approval by Vietnamese authorities in July to build a $1-billion complex for displays used in both high and low-end mobile devices.

Mr. Cao Viet Sinh, who is a senior government adviser and former deputy minister of planning and investment, said in an interview for the Wall Street Journal: “We greatly appreciate investment from South Korea in general and from Samsung in particular. South Korea has been among the largest source of foreign direct investment in Vietnam.” Mr. Sinh estimates that Samsungs exports from its Vietnamese factories will total $20 billion this year.

However, Samsung is not the only major multinational company that is investing into production capacity in Vietnam, seeking to capitalize on the nations well-educated and cheap workforce. Microsoft Corps mobile-phone business, which it acquired from Nokia Oyj earlier this year, is expanding its output in Vietnam, LG Electronics will open a TV and appliances factory and chip maker Intel already has a complex there.

Samsung Electronics Co. Ltd fell by 1.30% on Thursday to close at KRW1 141 000 per share, marking a one-year change of -19.53% and valuing the company at KRW194.11 trillion. According to the Financial Times, the 40 analysts offering 12-month price targets for Samsung Electronics Co. Ltd have a median target of KRW1 500 000, with a high estimate of KRW2 200 000 and a low estimate of KRW1 050 000. The median estimate represents a 31.46% increase from the last price of KRW1 141 000.