Samsung Electronics has been approved by the Vietnamese government to invest $3 billion to build a smartphone manufacturing center in the Southeast Asian country, according to the tech giant and local news outlets.

The new factory will be built in Thai Nguyen province, north of Vietnam’s capital Hanoi, where the South Korean tech conglomerate has been operating its first smartphone plant in the country since last March.

Samsung Electronics invested $2 billion to build the first smartphone factory, which has about 16,000 employees producing and assembling 120 million low-cost phones a year targeting developing markets.

The two investments bring Samsung’s investment in Vietnam’s smartphone sector to $5 billion. 

Its expansion in Vietnam comes as the company seeks to use Vietnam’s low-cost workforce in the face of increasing competition from Chinese budget phones. Samsung saw its profit drop to a three-year low in the third quarter of this year.

Samsung will also be able to get tax benefits for its expanded investment in the region.

The Korean company applied for a license from the Vietnamese government to build its second smartphone plant last month, according to local news.

Mobile phones have become Vietnam’s new growth engine, with exports reaching more than $19 billion between January and October this year, accounting for about 15 percent of its total outbound shipments, Vietnam’s statistical office said.

Samsung Electronics’ subsidiary Samsung Display, which develops displays for the tech giant’s televisions and mobile devices, also received approval from Vietnam last July to invest $1 billion to build a display module plant in the country.

Samsung Electronics also plans to build a plant in Ho Chi Minh City to produce household appliances such as TVs and washing machines.

By Park Hyong-ki (hkp@heraldcorp.com)