Vietnam emerges as high-tech manufacturing hub

On December 23 South Korean electronics giant Samsung opened Southeast Asia’s largest research and development center in Vietnam.

“Vietnam has now gone beyond its role as a global production hub for Samsung and become a strategic base for major research and development,” a company representative said at the center’s opening ceremony.

Half of all Samsung smartphones are manufactured in Vietnam, and the company is poised to raise its investment here from $18 billion to $20 billion.

“The new R&D center shows that Vietnamese tech production capabilities have increased considerably in recent years,” said Do Thi Thuy Huong from the Vietnam Electronics Industries Association, which represents more than 300 electronics industry enterprises in Vietnam.

“This means that foreign direct investors like Samsung trust that Vietnam can make the advanced products they need,” she told VnExpress International.

Over the last five years the government has made attracting more foreign direct investors a major goal in order to advance Vietnam’s position in the global supply chain.

And now the country’s footprint on the global advanced manufacturing world map is already quite large.

Apple suppliers like Foxconn and Luxshare have opened Macbook and AirPod factories in northern provinces, and tech giants like Intel and Samsung are also manufacturing semiconductor components here.

“Vietnamese businesses have been growing fast,” Huong said. “We started out by making simple and low-added value products, but now we’re contributing much more in terms of both product quantity and quality.”

Data from the Vietnam Electronics Industries Association shows that five years ago there were only a few Vietnamese vendors in the Samsung ecosystem. But now that number has reached over 200. And over 50 of the firms are tier-1 vendors and direct suppliers to the South Korean giant.

Japanese camera manufacturer Canon has over 100 local vendors in Vietnam, while electronics companies Panasonic and Brother have dozens each, many of which make difficult components such as TV screens.

American aviation firm Boeing held its first Aerospace Industry Forum in Vietnam last August, seeking local suppliers for its global supply chain.

Deputy General Secretary of the Vietnam Electronics Industries Association Do Khoa Tan said the above developments make clear that Vietnam has established a foothold in the high-tech manufacturing world and is becoming a more prominent destination for multinationals diversifying their supply chains out of China.

But still the country needs to overcome several challenges to advance further in the high-tech industry, analysts say.

Economist Le Dang Doanh said Vietnam would need to avoid the middle income trap if it wants to continue developing in the tech sector.

Huong proposed that the government issue bolder policies to help small and medium enterprises access credit and expand their operations as they face rising competition from companies in other regional powerhouses such as India.

High loan interest rates have been stymieing growth at local companies, she said, adding that many firms are thus increasingly at risk of approaching unconventional credit sources.

Education and training need to be redesigned to meet practical business needs as artificial intelligence will soon make the advantage of cheap labor in Vietnam irrelevant, she added.