Is Vietnam the next manufacturing hub in Asia Pacific?
An increasing number of US manufacturers have begun moving their manufacturing hubs away from China into Vietnam, which is now seemingly the fastest growing economy in the region as well.
While China and India continue to dominate the manufacturing industry in Asia Pacific, the Southeast Asian region remains a key enabler in the manufacturing ecosystem. Countries like Malaysia, Singapore, Thailand and Indonesia continue to provide key components to manufacturing giants in both China and India.
However, the increased demand for products combined with geopolitical situations and natural disasters in some of these countries seem to be disrupting the manufacturing supply chain. In India, production was halted at an Apple manufacturing facility recently due to a fire while Chinese manufacturers continue to face concerns of sanctions being imposed onto them.
Given these scenarios, some companies have decided to move their manufacturing facilities to nearby countries that are capable of supporting the demand. While Malaysia, Thailand and Indonesia may seem like an ideal choice, Vietnam has emerged as the preferred nation for most of these companies.
Suppliers to major tech companies have already moved or are in the process of moving their manufacturing facilities to Vietnam. Most recently, Meta announced that it will begin manufacturing its latest Quest mixed reality headset in Vietnam beginning 2025. Nick Clegg, Meta’s president for global affairs also said the company will expanding its AI innovation in Vietnam.
Apart from Meta, Apple has significantly expanded its operations in Vietnam. Apple currently has 35 vendors in the country, making it the leading supplier hub in Southeast Asia. Interestingly, Apply still has a significant manufacturing in China but is slowly moving more of its business to Vietnam. Analysts' reports stated that Apple plans to move 25% of its iPhone production to India and 20% of its iPad and Apple Watch production to Vietnam.
Apple’s primary iPhone supplier Foxconn has also invested US$551 million in two new projects in Vietnam’s northern coastal province. The Taiwanese supplier’s new facility will have the capacity to manufacture 4.2 million smart devices per year once it becomes operational.
In September 2024, Samsung also announced that its subsidiary Samsung Display Co will build a new OLED manufacturing plan in northern Vietnam. Samsung already has six manufacturing plants, a research and development center as well as a sales entity established in the country with a cumulative investment accumulating US$22.4 billion.
Can Vietnam support the growth?
As more US based organizations continue to move their manufacturing operations out of China to Vietnam, there is a slight concern if the Vietnamese workforce can deliver and meet the specific targets set by each organization.
Compared to China’s manufacturing capabilities, Vietnam is still emerging in most of its development but the increased investments by global companies signal the confidence brands have on the Vietnamese workforce.
The increased investment in the country is also expected to boost the skills of locals as they upskill themselves to work in modern state-of-the-art facilities that are being developed. The Vietnamese government also continues to support the development of policies and investment incentives that are favorable to foreign manufactures. These have been successful in attracting manufacturing hubs to move to Vietnam from China.
Vietnam’s local development and infrastructure is also capable of meeting the capacity demands required by these manufacturers. For example, Vingroup’s VinAI and VinFast have grown their presence outside the country, forming partnerships with companies around the world.
In May this year, Vingroup signed an MoU with Mitsubishi Corporation whereby both companies will conduct a feasibility study to establish a joint venture for data center operations in Vietnam. The two sides will also collaborate on developing interior design platforms and applying digital technologies to improve the management of real estate projects. Additionally, a focus will be placed on using green materials to achieve net-zero emissions, thereby reducing carbon emissions nationwide.