Why does Vietnam attract global tech giants?

VOV.VN - Tax incentives, low labour costs, along with plenty of other favourable policies can be considered the primary reasons why a number of global technology giants have chosen Vietnam as their base for production.

A magnet to global tech giants

In 2006, Intel announced the establishment of an assembly and testing factory in Saigon High-Tech Park in Ho Chi Minh City with a total investment of US$1 billion. This was the largest US high-tech investment project in Vietnam at the time.

Two years later, Samsung Electronics of the Republic of Korea marked its presence in the nation by unveiling an investment project worth US$670 million in the northern province of Bac Ninh. On March 25, the locality granted an investment license to Samsung Electronics Vietnam to undertake the project.

In 2011, Nokia of Finland also chose Bac Ninh as the manufacturing base for its well-known mobile devices. The Finish group poured more than US$300 million into the site that went into operation in 2014. Financial difficulties later forced the group to sell part of its stake to Microsoft, and the factory then changed its name into Microsoft Mobile Vietnam.

According to statistics, Samsung has recorded the highest level of investment growth in Vietnam. Specifically, after 14 years, rising from initial capital of US$670 million, the electronics corporation has invested nearly US$19 billion into the Vietnamese market, and the figure anticipated to keep rising moving forward. Alongside Bac Ninh, Samsung has also expanded its operations to Ho Chi Minh City, Hanoi, and Thai Nguyen.

Meanwhile, US technology giant Intel has also increased its investment from an initial figure of US$1 billion to US$1.5 billion at present. Patrick Gelsinger, CEO of Intel Corporation, revealed that the firm would continue to expand operations in the country, with capital set to increase many times in the coming time.

The second wave of technology FDI enterprises investing in the Vietnamese market started in 2016 and has so far not shown any signs of cooling down. In 2016, LG Display Vietnam Hai Phong was granted an investment license with capital of US$1.5 billion, and the firm has raised its registered capital to US$4.65 billion in the northern port city.

Over the past two years, Vietnam has also received billions of US$ of investment capital from major Apple suppliers such as Foxconn, Luxshare, Pegatron, and Wistron. Japanese news outlet Nikkei Asia recently revealed that Apple has already initiated plans to move some MacBook production to the country for the first time in 2023.

Moreover, China-based electronics company Xiaomi has made investments into manufacturing smartphone components in Vietnam as part of its plan to compete against market leader Samsung. In June, DBG Technology Company, a manufacturing partner of Xiaomi Vietnam, officially announced its first batch of Xiaomi’s genuine production in the country at a factory located in Thai Nguyen Industrial Park.

The appearance of several the world’s leading technology giants has turned Vietnam into a potential and attractive destination on the global technology equipment production map.

Rebalancing values

Statistics indicate that Vietnam produced 233.7 million mobile phones last year, making up nearly 20% of the total global supply. For Samsung alone, Vietnam has become the group’s largest phone producer, accounting for 60% of its total phone sales globally.

US-based IDC Research, Inc., a firm that provides market research and advisory services, recently revealed the results of a survey which shows Vietnam emerged as the second largest smartphone exporter in the world in the initial months of the year.

In December 2022, the US$220 million Research and Development Center (R&D) of Samsung was inaugurated in Hanoi, clearly demonstrating the group’s ambition to increase its presence in the Vietnamese market. The group also announced plan to produce semiconductor chips, starting in the summer of 2023.

However, technology experts has assessed that Vietnam-based plants are mostly involved in processing and assembly which creates the lowest added value in the supply chain of technology corporations. These foreign firms significantly contribute to GDP growth, export growth, and employment, although their budget revenue remains modest as they enjoy numerous tax incentives from the State.

Meanwhile, Vietnamese owned enterprises have not yet received spillover effects from technology giants and have yet to make a presence in the supply chains of these big projects. Indeed, the majority of factories belonging to these groups still use products produced by FDI suppliers.

Although these weaknesses have been identified for years, there are not enough strong solutions for the country to attract the world’s big technology enterprises with higher added value.

Experts have suggested that Vietnam refer to China’s experience in taking advantage of FDI attraction as it seeks to develop domestic technology enterprises. After a while, China has become the world's leading producer of electronic devices with big names such as Huawei, Xiaomi, Alibaba, Baidu, Tencent, and ZTE.

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