[THE INVESTOR] Vietnam’s minimum wage hike is expected to take a heavy toll on big Korean firms such as Samsung and LG that have been beefing up production there due to low labor costs.

Currently, the minimum wage for Vietnamese workers ranges between US$108-157 across regions.

In the latest wage talks, labor groups asked for an 11 percent increase from next year, while employers resisted, proposing a moderate 4.62 percent raise. 

“There are over 4,000 Korean companies doing business in Vietnam. A sharp wage hike will drop profitability, especially in labor-intensive industries,” said Im Choong-hyun, head of Korea Chamber of Commerce and Industry Vietnam office.

“With the estimated wage raise, the companies that lose productivity will consider moving to other countries in order to reduce costs.”

Other expenditure for medical and social insurance benefits are also expected to rise to along with the average wage hike.

According to last year’s data, Samsung Electronics produces about 40 percent of its smartphones in Vietnam’s two plants. Its sister firm Samsung C&T also secured a US$805 million deal to build a display module plant there.

LG Electronics also opened a new US$1.5 billion plant to produce electronics products such as TVs, handsets and home appliances in Hai Phong, the third-largest city in Vietnam. In April, it signed a deal to build a display module factory in the same city, which is slated to open next year.

By Ahn Sung-mi (sahn@heraldcorp.com)