Vietnam, located on the Eastern edge of mainland Southeast Asia, has emerged as a dynamic and rapidly growing nation with a strengthening economy and industrial sector. With a population of around 100 million, this socialist-oriented market economy has transformed since the ‘Đổi Mới’ reforms in 1986, fostering substantial economic growth.
Vietnam has steadily grown to become a staple hub of global manufacturing, particularly in the electronics sector, which accounts for nearly 18% of its total manufacturing output and contributes heavily to its exports. Major names like Samsung, Intel, HP, LG, and Canon, all use Vietnam for its manufacturing capabilities, making significant investments into the country. Beyond its economic strides, the country boasts a rich cultural heritage, stunning landscapes, and a strategic location that has bolstered its integration into global trade networks.
A shift in focus
Light manufacturing has been the dominant force driving Vietnam’s economic growth since the Đổi Mới reforms of the 80s. However, as times change, so too has Vietnam’s focus in the global manufacturing market. Within the last decade in particular, Vietnam has been strategically reorienting itself to become a dominant player within the global microelectronics industry. These developments have only been aided by the growing divides between the West and China, which has seen trade restrictions, tariffs, and policies hit the manufacturing giant. In 2023, Vietnam’s hardware and electronics exports amounted to over $113 billion for the nation, which despite being strong was actually a 22% decline from the 2022 number. However, 2024 was a rebound year for Vietnam, with export sales rising by nearly 16.8% to around $132 billion. Now, the nation is aiming even higher, wishing to achieve a 20% rise in 2025 to $160 billion.
Attracting investment and building an industry
Vietnam’s rise as a hub for foreign direct investment (FDI) in semiconductors and microelectronics owes much to the ‘China Plus One’ strategy of many nations, as well as key early investments from big names. Samsung was the first company to lead the charge into Vietnam, investing in a $670 million mobile phone plant in Bac Ninh in 2008. This investment would grow to $17.3 billion in the coming years, making Samsung accountable for over 25% of Vietnam’s exports and placing the nation as the second-largest smartphone exporter.
Intel was another company that propelled Vietnam into the global manufacturing spotlight, investing $1 billion into a semiconductor facility in Ho Chi Minh City in 2010 – this would open the doors for the likes of LG, Panasonic, and Foxconn.
Vietnam’s low labour costs, favourable demographics, and extensive Free Trade Agreements (FTAs) like the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and Regional Comprehensive Economic Partnership (RCEP) have made it a manufacturing hotspot. Vietnam is now consistently rated as ASEAN’s top potential FTA partner for trade giants like the US, cementing its place in the global supply chain.
Expanding into the future
Whilst Vietnam is certainly an established part of the global supply chain, it’s not sitting idle in a time that is ripe for growth. Vietnam is actively advancing its role in the global semiconductor and electronics industries through a plethora of initiatives and policies that it hopes will propel its position even further. In September 2024, Prime Minister Pham Minh Chinh approved the ‘Strategy for Vietnam’s Semiconductor Industry Development through 2030, Vision to 2050’, which outlines a passed approach to bolster the sector.
Phase 1 (2024-2030) of this policy has a focus on attracting more key FDI to establish new foundational capabilities for Vietnam in research, design, production, packaging, and testing. The goal is to set up at least 100 design enterprises, one small-scale semiconductor chip manufacturing plant, and ten packaging and testing facilities. This phase aims for the semiconductor industry’s revenue in Vietnam to reach over $25 billion annually, with an added value of 10-15%.
Phase 2 (2030-2040) aims to combine self-reliance with continued FDI to increasingly develop the semiconductor and electronics industries. Targets in this phase include forming at least 200 design enterprises, two semiconductor chip manufacturing factories, and 15 packaging and testing plants, with the semiconductor industry’s revenue expected to exceed $50 billion annually, contributing 15-20% in added value.
Phase 3 (2040-2050) puts Vietnam as a leading country in the semiconductor and electronics industries as well as in research and design capabilities, similar to Taiwan today. By this phase, Vietnam is aiming to establish at least 300 design companies, three semiconductor chip manufacturing plants, and 20 packaging and testing facilities, with the semiconductor industry’s revenue projected to surpass $100 billion annually, achieving 20-25% in added value.
To support these ambitions, Vietnam is enhancing existing and enacting new investment policies. In July 2024, the government of Vietnam finalised plans to attract more FDI to the nation, providing support for infrastructure, fixed assets, and human resources training costs. This initiative seeks to draw $30-50 billion in annual foreign investment to 2030, focusing on high-tech projects, including semiconductors and artificial intelligence.
Additionally, Vietnam is addressing challenges such as power shortages and the need for a skilled workforce to support the semiconductor industry’s growth. The government is investing in STEM education and partnering with universities and multinational corporations to upgrade its workforce, aiming to attract $40 billion or more in registered FDI annually over the next five years, with a focus on high-tech investments. The government is aiming to spend $1 billion on acquiring 50,000 semiconductor engineers by 2030, with official estimates suggesting the nation will require 35,000 engineers and 13,500 chip designers by the end of the decade.
Final thoughts
Vietnam’s transformation into a global manufacturing hub, particularly in electronics and semiconductors, has been – and will continue to be – driven by strategic investments, favourable policies, and ambitious goals.
With initiatives to attract foreign investment, develop its domestic workforce, and expand high-tech industries, Vietnam is making itself a key player in the global supply chain. While challenges remain and there is a long path ahead, the nation’s proactive approach make me believe that it will come to have a strong economic future and influence, particularly as China wariness increases globally.
This article originally appeared in the Jan/Feb issue of Procurement Pro.
