VOV.VN - Vietnam has earned its status as a global production factory, although there are fears that it will remain an assembly platform in the future, according to a piece published by Japanese news service Nikkei Asia.
The article notes that is users flip over an Apple Watch or MacBook box in the future then they may see "Assembled in Vietnam".
Any shift in production by Apple would be a win for Hanoi, which for more than a decade has made attracting top technology brands like Intel, Samsung and Xiaomi a priority as they seek to set up supply chains in the country.
Apple sources AirPods earphones from the nation and is testing watch and laptop production. Making more complex devices would be a badge of success for the country’s manufacturing industry and its strong determination to participate in the global electronics supply chain.
The nation is already the only economy of its size and development level to have cracked the top six on Apple's coveted supplier list of iPhone producers in 2020 sourced from 21 suppliers in Vietnam, up from 14 in 2018.
Vietnamese success in attracting supply chain business, and its failure to create its own domestic high-technology sector, has created a dilemma for policymakers and some curious contradictions in terms of the local economy. In line with this, the nation has recorded technology export growth that no substantial Asian rival has so far matched, with high-tech goods as a share of exports hitting 42% in 2020, up from 13% in 2010.
Despite this, the country was able to add little value of its own to these exports and has no homegrown tech champions. According to a white paper published by the Ministry of Industry and Trade in 2019, the nation lagged behind most of its Asian peers in metrics such as trade in value added and manufacturing value added which serve to measure the contribution of the domestic economy to trade.
Industry leaders therefore express frustration that much of their sector remains a glorified assembly line for other countries' big brands. Samsung Electronics represents another prime example, with the tech giant being the only foreign company among the 25 in Vietnam on its 2020 top suppliers list, despite operating in the country for 14 years and relying on it for half of its smartphone shipments. "You have something called the glass ceiling. It's very difficult to break through that ceiling," the Luong Hoang Thai, multilateral trade director of the Ministry said, referring to Vietnamese efforts to advance up the global value chain.
The newswire assesses that in previous decades, Asia's "tiger" economies demonstrated that such a journey could be made. The Republic of Korea, Taiwan (China), and China all started from low-tech manufacturing before steadily advancing to cars, semiconductors, and robots. Indeed, Vietnam boasts many of the same advantages as those countries, including a disciplined workforce, low costs, and a state industrial policy. However, the nation lacks some critical elements such as relevant skills and a good infrastructure.
"Even though many of the East Asian countries try to follow this kind of model," Thai said, "very few have been successful, going all the way toward the stage of innovation."
The media outlet also highlights the nation’s promising first steps with industrial parks being supplanted marshland, with many of these sites being a haven for foreign tech companies that have come to redesign their supply chains.
Tenants include Apple supplier Wistron, Seoul Semiconductor, and Anam Electronics, which exports JBL Bluetooth speakers and Yamaha sound systems. Interest in the country as a factory centre has therefore risen in line with trends north of the border three hours away.
Over the past decade, wage inflation in China's southern coastal manufacturing hubs have priced out many suppliers, who have then sought to shift production to lower-wage Vietnam.
More recently the country has been the beneficiary of bad news. First, the US-China trade war which forced American companies, along with many Chinese companies, to move suppliers to Vietnam in an effort to escape sanctions. Then came the COVID-19 pandemic, with lockdowns in China hastening companies such as Apple to shift production out of China and toward Vietnam.
When shutdowns raised costs to ship goods out of the northern neighbour, Anam turned to a subwoofer speaker producer in Vietnam. In Ha Nam, the South Korean company's factory contains crucial elements of smart speakers, whilst circuit boards fill an entire room and bots ferry parts between numerous workstations.
"Vietnam has been doing well so far by attracting investment," Park Hyeon-su, director of Anam Vietnam said. However, if the country does not upgrade to complex products then it risks a "vicious cycle of technological decline, environmental pollution, low labor productivity, high energy consumption and low efficiency."
The Vietnamese economy has more than doubled in size from 2010 to 2020, according to the World Bank. However, the country has a limited window to take advantage of this explosive growth. "The low-hanging fruit of industrialization is to capitalize on your endowments, which is cheap labor," said Trinh Nguyen, Natixis economist.
In other words, if wages are to increase then companies that currently find Vietnam to be hospitable might eventually leave for cheaper countries such as neighbouring Cambodia. The supply chain industry is therefore fraught with politics that makes investments particularly unstable, such as companies potentially being drawn away by their own government's homecoming policies, such as those form Japan, or by the desire to "nearshore" next to major markets, such as Latin America or Africa.
Other risks include inbound investment that is low-quality or creates pollution, as well as tech advancements that make it costlier and harder for poor countries to move up the value chain, according to experts.