Major South Korean companies including KT are accelerating the establishment of overseas development centers, driven by rising demand for developers amid the artificial intelligence boom. Vietnam has emerged as the primary hub for global research and development operations.
The shift is fueled by a growing pool of talent with global-level practical experience, labor costs less than half of Korea's, and relative freedom from domestic employment regulations such as the 52-hour workweek limit.
However, experts warn that the spread of R&D strategies based on overseas personnel could make it difficult to transform Korea's national industrial structure toward an R&D-centered economy in the long term. They argue the government should ease labor regulations to enable companies to strengthen their R&D base both domestically and abroad.
According to industry sources on January 25, KT is pursuing the construction of a Global Development Center (GDC) in Vietnam as part of its R&D offshoring strategy. Offshoring is a management approach where companies relocate facilities to countries with lower labor costs, such as China or Southeast Asian nations, to reduce production costs. Since the pandemic, this trend has expanded beyond manufacturing to R&D, with companies building development centers in Vietnam to lower research costs. Recently, new demand driven by AI has accelerated this movement.
KT is reportedly studying Samsung Electronics and LG Electronics as benchmarks. Samsung Electronics completed an R&D center near Hanoi in December 2022, positioning Vietnam as a global strategic base for both production and R&D. The facility currently employs more than 2,000 researchers, and its significance to Samsung's global strategy was underscored by Executive Chairman Jay Y. Lee's personal visit at the time of completion.
LG Electronics has also been developing Vietnam as a global development hub, upgrading its R&D center opened in Hanoi in 2016 to an official subsidiary in 2023. The center employs more than 1,000 researchers working on the company's flagship home appliances as well as automotive electronics development. Other major Korean conglomerates, including Shinhan DS, Shinhan Financial Group's IT service arm, and POSCO DX under POSCO Group, have been strengthening their development centers in Vietnam in recent years. Naver also established development centers in Hanoi and Ho Chi Minh City in 2021.
Companies are expanding their R&D presence in Vietnam due to the combination of solid development capabilities and low wages. Vietnamese developers' programming skills are currently rated in the upper-middle tier globally. In the International Collegiate Programming Contest (ICPC), the world's largest university-level programming competition, Vietnam ranks 19th among 118 countries in cumulative national standings through this year—lower than Korea's 9th place but higher than Germany at 25th and India at 35th. This suggests Vietnam's development education and talent are competitive.
Labor costs are less than half of domestic hiring. According to ITviec, a local developer recruitment platform, a Vietnamese full-stack developer with six years of experience earns 36.35 million dong (approximately $82,000 annually or 2.05 million won monthly). Considering the Korea Software Industry Association's proposed 2025 average monthly salary of 6.94 million won for domestic application software developers, Vietnamese labor costs are roughly one-third of Korean levels.
"During the pandemic, when there was a global developer shortage, Vietnamese developers had opportunities to work for global companies, gaining international experience," said Kim Hyun-joon, head of the industry team at Talentgetgo, a company that verifies Vietnamese developers' coding abilities and matches them with client companies. "Since then, their characteristically diligent work culture combined with low wages has led Korean companies to actively establish development organizations in Vietnam."
Most importantly, Vietnam's less stringent employment regulations have been a key factor. "The stricter domestic labor laws are an important consideration," an IT industry official said. "When hiring overseas, intensive work during busy periods is possible."
Local IT outsourcing firms are also experiencing rapid growth. FPT, Vietnam's largest IT outsourcing company with more than 20,000 local developers, has opened three additional offices in Korea over the past two years in Yeouido and Pangyo. KT has reportedly contacted FPT in preparation for establishing its GDC.
Experts believe the R&D offshoring trend is likely to continue for some time given the growing prevalence of overseas business operations. However, they emphasize that strengthening the domestic R&D base must occur in parallel.
"We need to focus on why companies have no choice but to go to Vietnam," said Lee Kyung-mook, a professor of business administration at Seoul National University. "Korea is unusually restrictive in regulating working hours in R&D fields, excluding Europe, and as R&D productivity declines, companies are looking overseas."
Lee added, "To increase Korea's per capita GDP, the national economy must transition to an industrial structure specialized in R&D. If expanding overseas R&D remains advantageous for companies as it is now, we could move in the opposite direction from the national industrial structure we should be pursuing."
Calls are emerging for the government to take a progressive approach to regulatory reform in the R&D sector. "Domestic industry is becoming increasingly oriented toward contraction, with labor regulations increasing and workloads decreasing," said Hwang Yong-sik, a professor of business administration at Sejong University. "Policymakers need to listen to voices from development sites and work together on alternatives to expand domestic R&D employment."
