For Which Industries Does It Make Sense To Produce and Buy in Vietnam?

Vietnam is rapidly becoming a favoured destination for international companies looking to relocate or diversify their manufacturing operations. This trend is portrayed by significant investments from global corporations such as Samsung, Apple, Intel, LG, Foxconn, and Panasonic, showcasing Vietnam’s increasing importance in the global supply chain.

Cases of Well-Known Company Relocations to Vietnam

Samsung Electronics: A leader in Vietnam’s manufacturing surge, Samsung has shifted a substantial part of its smartphone production from China to Vietnam in Thai Nguyen and Bac Ninh provinces, making the country a key global production hub. Bac Ninh facility alone responsible for a large percentage of Samsung’s total smartphone production. The Thai Nguyen plant is another key site, focusing on both smartphones and other electronic devices.

Apple Inc.: Reflecting a strategic shift in its manufacturing strategy, Apple is moving some of its AirPods production lines to Vietnam, reducing its reliance on Chinese manufacturing, mainly to Bac Giang and Bac Ninh provinces.

LG Electronics: LG is transferring part of its production, particularly in the home appliance sector, from South Korea and China to Vietnam, establishing a large base in Hai Phong. The Hai Phong facility is involved in producing a range of electronic products, including TVs, air conditioners, and washing machines, among others.

Foxconn Technology Group: As a primary supplier for Apple and other tech giants, Foxconn is expanding its operations in Vietnam, transferring some production capacity from China. Foxconn’s Vietnamese facilities are involved in the manufacturing of smartphones and other electronic devices, with plans to scale up production capacities.

Panasonic Corporation: Panasonic has relocated its refrigerator and washing machine production from Thailand to Vietnam, consolidating its appliance production in the country.

Driving Factors for the Relocation

The strengthening economic ties between the US and Vietnam, marked by a surge in bilateral trade, further enhance Vietnam’s appeal. The US’s Most Favoured Nation (MFN) status and Vietnam’s participation in key trade agreements like the CPTPP play a vital role in attracting US businesses, especially in the context of the US-China trade war. While Increasing labour and operational costs in China have diminished its appeal as the low-cost manufacturing hub it once was, Vietnam offers significant advantages for businesses with its cost-effective labour force, proximity to major Asian markets, and robust growth supported by foreign investment-friendly policies. The government incentivizes investment, particularly in economic and high-tech zones, while the growing consumer market and improved infrastructure make it ideal for large-scale operations. In response to global uncertainties and the need for supply chain diversification, Vietnam stands out as a viable alternative, balancing cost, quality, and reliability. Additionally, the increasing trend of local component suppliers has made Vietnam attractive to various industries looking to relocate manufacturing and assembly facilities.

Several industries stand to significantly benefit from relocating to Vietnam, leveraging the country’s unique economic, geographic, and labour advantages. The electronics and technology sector, with companies involved in assembling and producing consumer electronics, mobile devices, and computer components, is poised for immense growth, with the presence of industry giants like Samsung, Intel, and Apple. The automotive and auto components sector is also growing, with companies like Hyundai and Toyota investing, signaling Vietnam’s transformation into a manufacturing hub with growing local supply chains and export prospects. Manufacturers of industrial machinery and equipment find Vietnam appealing due to the rising regional demand and industrial growth. High-tech and semiconductor sectors, strengthened by investments from companies like Intel, find Vietnam’s growing expertise and high-tech incentives attractive. Renewable energy companies, particularly in solar and wind, are drawn to Vietnam’s supportive government policies and increasing domestic demand. Lastly, the pharmaceuticals and healthcare industry sees potential in Vietnam’s developing healthcare infrastructure and the opportunity to serve the broader ASEAN region, making it an attractive destination for medical companies and device manufacturers.

Outlook is Promising with Incoming Manufacturing Expansions

The outlook for local suppliers in Vietnam is increasingly promising, signaling an ongoing trend where more companies are looking to start manufacturing components in the country in the coming years. Driven by Vietnam’s strategic location, favorable economic policies, and competitive labor costs, the nation is fast becoming a hub for both export-oriented and domestic manufacturing. This can be seen by LG expanding its manufacturing in Vietnam, Hai Phong, doubling LG Innotek’s camera module production capacity by 2025. A subsidiary of the German adhesive tape manufacturer Tesa SE, Tesa Tape has been expanding in Vietnam, supplying various adhesive solutions for automotive, electronics, and consumer goods. Wistron Corporation, a major Taiwanese original design manufacturer, one of Apple’s main manufacturing partners, will also be focusing on manufacturing the main graphics processing unit (GPU) server module, ICT (information and communication technology) products, including servers, computers, and mobile devices in Vietnam.

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