Capitalizing on Vietnam’s Tech Expertise: Foreign Businesses Shift Innovation Activities to Vietnam

Vietnam is becoming an option for companies outsourcing R&D and innovation, as the emerging Southeast Asian nation is actively pursuing technological growth. The pool of computer science and engineering talents mostly comes from local institutions like Hanoi University of Science and Technology (HUST), Ho Chi Minh City University of Technology (HCMUT) and Hanoi University of Engineering and Technology (VNU-UET).

Ho Chi Minh City, District 3, November 2021 – Local talents such as these help building Vietnam’s growing reputation as a regional hub for R&D and Innovation in Asia, with most graduates hailing from local Vietnamese universities.

Partnerships on company level also support innovation and R&D activities in Vietnam. During the Vietnam-UK Friendship Year 2023, workshops were held in London, which aimed to foster cooperation between Vietnamese and British technology firms. The workshop, co-organized by VINASA, techUK, the Vietnamese Embassy, and Trade Office in the UK, focused on introducing the Information & Communication Technology (ICT) capabilities of Vietnamese companies and creating connections with UK counterparts. Vietnam’s ICT industry has shown impressive growth, with total revenue increasing from 30 billion USD in 2013 to 148 billion USD, and is now a top destination in Southeast Asia for ICT. The country is seeking partnerships in digitization, particularly with British technology businesses, viewing them as key partners in areas like digital health, financial centers and fintech.

The potential for ICT cooperation between Vietnam and the UK is vast, covering digital transformation for public and private sectors, cities and urban areas, and emerging technologies like AI, blockchain, and the metaverse. Vietnam’s strategic location also positions it as a gateway for British enterprises into the ASEAN market. The UK’s shift towards the Indo-Pacific region and participation in CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership) highlight the importance of its cooperation with Vietnam at various levels.

Vietnam’s National Digital Transformation Programme aims to accelerate digital transformation by 2025 with a vision towards 2030. This initiative focuses on digitalizing businesses, administration, and production activities, targeting a broad range of entities for digital adoption. The government is offering incentives like a 50% reduction in consultancy costs and promoting cooperation with relevant agencies. Key goals of the programme include enhancing online public services, digitalizing records at various administrative levels, developing national databases, and increasing labor productivity.

Vietnam has made significant progress in the digital economy, with its internet economy growing to US$14 billion in 2022 and projected US$45 billion by 2025.

An example of this tech growth and R&D is Bkav, a pioneer in the smartphone industry, known for integrating AI into smartphone cameras, a global first. The company’s Bphone smartphone has received significant attention, being recognized in the top 10 technology events for two consecutive years. Bkav has also made notable contributions to cybersecurity. It was the first to uncover a facial recognition vulnerability in laptops and a critical flaw in Google Chrome shortly after its launch. Additionally, Bkav played a key role in identifying the master server behind massive DDoS attacks targeting US and Korean government websites in 2009, a milestone in cybersecurity history. Bkav’s expertise extends to discovering vulnerabilities in technologies like Face ID in Apple’s iPhone X and iris recognition in Samsung Galaxy S8 smartphones. The company also organizes the WhiteHat Grand Prix, a globally reputed cybersecurity competition.

At a launch event on May 10, 2020, Bkav CEO Nguyen Tu Quang revealed the pricing for four different models of the fourth-generation Bphones. Photo credit: Bkav.

Drivers behind Vietnam’s tech growth benefitting foreign businesses is a young, highly educated workforce that has lead to significant growth in tech-focused startups and innovation hubs, particularly in cities like Ho Chi Minh City and Hanoi. The country’s cost-effective living and favourable exchange rates make it an economically viable option for outsourcing web development and other technological projects. This cost advantage is particularly attractive to European SMEs, allowing them to achieve substantial savings without compromising on quality.

Additionally, Vietnam’s investment in communications infrastructure, political stability, and sustained economic growth attract foreign investors. The government’s supportive stance, including training programs and initiatives in emerging technologies like AI, cybersecurity, blockchain, and IoT, further enhances the country’s tech capabilities. Tax benefits for tech companies and investments in education, reinforces this growth.

In light of increasing wealth and an expanding middle class benefiting from improved conditions and enhanced financial support for higher education, both the U.S. Agency for International Development (USAID) and the Vietnamese government anticipate a positive future and expect a rise in the number of graduates in STEM subjects over the coming decade.