South Korea is seeing a surge in its exports to Vietnam.

The Korea International Trade Association said Thursday that Vietnam accounted for six-point-four percent of South Korea’s total overseas shipments in the first half of this year. This is nearly half the 14 percent shipped to the U.S.

The exports to Vietnam were worth more than 18 billion U.S. dollars, marking up some ten percent on-year.

Wireless communication devices represented the largest portion or over two-point-nine billion U.S. dollars in the country’s shipments to Vietnam. Semiconductors came in second at two-point-65 billion U.S. dollars, followed by flat panel displays.

The figures show that the Southeast Asian nation is emerging as a strategic production base for global companies, such as Samsung Electronics and LG Electronics, with its low labor costs and active policies to attract foreign investment.

A bilateral free trade agreement, which took effect last December, is predicted to further boost South Korea’s exports to Vietnam.

However, South Korean companies operating in Vietnam have some managerial problems to resolve, such as improving business results that are still disappointing despite the large scale of their investments.

South Korean firms directly invested 15 billion U.S. dollars in Vietnam in 2015. But their operating and net profit rates came to two-point-three and zero-point-six percent, respectively, far lower than the average of three-point-two percent and one-point-seven percent South Korean companies posted in other nations.