Vietnamese market continues to soar in global supply chains amid favourable conditions

The article outlines how the Vietnamese electronics manufacturing services (EMS) market is set to grow at a CAGR of 5% between 2020 and 2026.

As the world is currently in an era of protectionism where issues relating to the novel coronavirus (COVID-19) are still being felt by many economies globally, the nation is striving to become one of the prime locations for export manufacturers.

According to figures released by Vietnam’s General Statistics Office (GSO), the country’s consumer electronics sector recorded its highest ever production of 369.6 million units in October, 2020, followed by the electronic components sector which was able to produce a total of 325.7 million units.

Given exponential growth witnessed in the manufacturing sector, coupled with growing domestic demand and exports, primarily in relation to electronics and automobiles, the EMS business is projected to scale new heights moving forward.

Many global OEMs and EMS providers such as Samsung, LG, and Foxconn, who are Apple’s contract manufacturer, are now investing in the production of printed circuit boards, camera modules, printers, servers, phones, networking equipment, televisions, and other electronics equipment in the nation.

Samsung, which in 2020 held approximately 70% of the handset market share in the country, also represents one of the largest FDI players locally, with the nation hosting one of Samsung’s largest smartphone production bases outside of the Republic of Korea.

Moving ahead to 2022, Samsung is projected to complete construction on its US$220-million Vietnamese research and development centre.

The article also states that there are a range of factors which make Vietnam a favourable destination for manufacturers, including the constant improvement in investment and business policies, Vietnamese participation in bilateral and multilateral free trade agreements, increased FDI, and geographical proximity to China.

Pegatron has made roughly US$1 billion worth of investment in its Vietnamese plant which will be rolled out over three phases and will specifically target investments in computing, communications, and consumer electronics facilities by 2027.

Furthermore, Foxconn is also moving some parts of its iPad and MacBook assemblies to the country from China, with this occurring amid increasing tensions between the United States and the northern neighbour, as the firm seeks to reduce risk for its production. In addition, it has also been awarded a license to develop a US$270-million plant that will produce laptops and tablets within the nation.

Moreover, Google is also keen to move production of its smartphone brand Pixel for the US market to the country. Indeed, it is also likely that the company may end up moving its hardware production to Vietnam, with similar plans underway at companies such as Samsung, Intel, and Microsoft.

Xiaomi is also aiming to take advantage of local factors such as cheap labour and other favourable market conditions, with the company most recently opening its first phone assembly factory in the nation.

The article concludes by stating that the country is known for its comprehensive and five-year to ten-year strategies, including ‘Made in Vietnam 2025: Industrial Policy and Strategy 2025’ and ‘Vision for 2035’. These policies have not only helped to change the Vietnamese growth story which started 30 years ago, but have also facilitated absorption of industry from China, including numerous shifts triggered by trade wars.