Vietnam’s star rises in global supply chains

06:00 | 12/08/2022 Industry

(VEN) - Vietnam is a rising global manufacturing center, with supporting industries that have undergone substantial changes to play a significant role in global value chains, especially in the electronics industry.

Great opportunities

Vietnam has climbed up the value chain over the years, becoming a key electronics manufacturing hub, attracting stable foreign direct investment with its sound macro fundamentals, preferential tax incentives and an abundance of relatively cheap and productive labor.

vietnams star rises in global supply chains
Electronics, a major driving force of Vietnam’s export growth

Vietnamese enterprises are increasingly integrating into the global production chain, as confirmed by international organizations, including the World Bank and the Hongkong and Shanghai Banking Corporation Limited (HSBC) in their reports.

For decades an apparel and footwear exporter with a low value added, Vietnam has gradually become an important production center in the technology industry, according to HSBC.

Ngo Dang Khoa, HSBC Vietnam’s Country Head of Markets and Securities, said Vietnam has become a production center of electronics and cell phone components, helping it lure an increasing number of foreign investors and become a new production hub.

According to a HSBC report, the success of Samsung and Intel in Vietnam has encouraged other giant technology corporations to speed up their shift of supply chains to Vietnam, and Vietnam is becoming an ideal destination for foreign investors to build and expand factories.

According to the Republic of Korea’s (RoK) AJU Business Daily, LG Display, a subsidiary of LG Group, is expected to raise about US$1 billion in investment capital from domestic and foreign banks to expand its OLED display production and build factory infrastructure in Vietnam.

In February 2022, the RoK's leading electronics group, Samsung, announced that it would invest an additional US$920 million in Vietnam. Meanwhile, Japan's Nikkei Asia magazine reported in early June that Apple is moving its iPad production out of China, towards Vietnam. German radio station DW reported that companies, especially electronics manufacturers, are investing heavily in Vietnam.

vietnams star rises in global supply chains
Many leading technology corporations have shifted their supply chains to Vietnam

Booting domestic enterprises

Although it is among the world’s top-12 and the Association of Southeast Asian Nations’ (ASEAN) top-3 electronics exporters, about 95 percent of Vietnam’s electronics export value is manufactured by foreign-invested enterprises.

The Ministry of Industry and Trade is implementing international cooperation programs under which foreign-invested enterprises have been offering domestic suppliers with support and training, while domestic enterprises have been making greater efforts to improve product quality and competitiveness in order to join foreign-invested businesses’ supply chains.

The Ministry of Industry and Trade’s Industry Agency has been participating in industrial international cooperation, especially for electronics and support industries. For example, the agency worked with the RoK to build the Vietnam-Korea Technological Consultancy and Solution Center (VITASK).

Agency Deputy Director Pham Tuan Anh said the Ministry of Industry and Trade was working with Samsung Vietnam on practical, efficient programs, contributing to improving Vietnamese support industries’ capacity, including cooperation in consultant training, and consultancy and technical assistance for improvement of support industry production and finished product manufacturing.

The Industry Agency says it is important to create opportunities for potential domestic electronics businesses to develop and get them to drive the domestic electronics market’s development. It is also urging a review and improved policies and laws, especially regarding rules of origin of Vietnamese goods, and solutions for expanding domestic and foreign markets.

The International Monetary Fund (IMF) forecast that by 2025, Vietnam will surpass the Philippines and Singapore to become the third largest Southeast Asian economy with a gross domestic product (GDP) of more than US$571 billion. Vietnam has become a rising star in global supply chains, gaining substantial global market share in textiles, footwear and consumer electronics.

Viet Anh