After more than 3 decades of attracting FDI, Vietnam is becoming the center of the world's supply chain.

After 78 years of Independence and more than 3 decades of opening up to attract foreign direct investment (FDI), Vietnam has become an indispensable link in the global supply chain. This is a proud achievement.

Since the US-China trade tensions, and the pandemic, technology giants have shifted their supply chains to Vietnam. (Source: Investment Newspaper)

Indispensable link

A few days ago, Mr. Choi Joo Ho, General Director of Samsung Vietnam, and Korean and Vietnamese experts visited 12 enterprises that received support from the Smart Factory Development Support Project in Phase I/2023. Delighted to witness the dramatic changes of the enterprises after participating in the Project, Mr. Choi Joo Ho expressed his hope that the companies will continue to maintain and improve in the coming time to achieve even greater success in the future.

“Samsung hopes that the smart factory development cooperation project will contribute to improving the competitiveness of Vietnamese enterprises throughout Vietnam, helping enterprises have more opportunities to participate in the supply chain not only of Samsung, but also the global supply network,” Mr. Choi Joo Ho has said many times.

Since its large investment in Vietnam, with a total investment capital of over 20 billion USD to date, Samsung has always made efforts to find, connect and bring Vietnamese enterprises into its global supply chain. Thanks to these efforts, the number of Vietnamese tier 1 and tier 2 suppliers in Samsung's global supply chain has increased 10-fold, from 25 enterprises in 2014 to 257 enterprises by the end of 2022.

The numbers may not be as expected, but since investing in Vietnam, big investors such as Samsung, Intel, LG, etc. have contributed to "upgrading" the economy , bringing Vietnam deeper and deeper into the global value chain.

Just 10-15 years ago, few people could have imagined that Vietnam could become the center of the global information technology and electronics industry. But now, the story is different.

“Factories in Vietnam currently supply more than 50% of Samsung's mobile phone production globally,” said Mr. Choi Joo Ho.

Meanwhile, according to Mr. Kim Huat Ooi, Vice President of Manufacturing, Supply Chain and Operations, and General Director of Intel Products Vietnam, Intel Products Vietnam is the largest of Intel's four assembly and testing factories worldwide.

With an investment capital of 1.5 billion USD, in recent years, Intel Products Vietnam has shipped more than 3.5 billion product units and is currently producing Intel's most modern technology chipsets, such as 5G, IOT, the latest 13th generation Intel Core processors...

“Investment flows into the Asia- Pacific region are shifting significantly to high-value industrial sectors,” said Christopher J Marriott, General Director of Savills Southeast Asia, adding that Vietnam is considered one of the prominent destinations with production capacity that meets the expectations of international investors and leading technology corporations that prefer to invest in Vietnam.

In the first 8 months of this year, despite a decrease compared to the same period last year, the export turnover of electronic products, computers and components, as well as phones and components still reached more than 70 billion USD, accounting for nearly 30% of the country's total export turnover (more than 227 billion USD). Contributing to this figure, it is impossible not to mention Samsung, Intel, LG, and Foxconn, Luxshare, Goertek - new names that have continuously poured capital into Vietnam in recent years.

“Vietnam has transformed itself into a rising star in the global supply chain, capturing significant global market share in many sectors, including textiles, footwear and consumer electronics,” HSBC Bank said in a recent report.

Among the 5 items with export turnover of over 10 billion USD in the first 8 months of this year, in addition to computers, phones and components, machinery, equipment, and other spare parts also had an export turnover of nearly 27 billion USD, textiles and garments were over 22.3 billion USD, footwear was over 13.4 billion USD...

One after another, especially since the US-China trade tensions, and even during the pandemic, technology giants have shifted their supply chains to Vietnam.

New hub of global supply chain?

Not long after receiving the investment registration certificate for the 293 million USD project in Hoang Mai I Industrial Park ( Nghe An ), investor Runergy PV Technology Co., Ltd. decided to increase its investment capital to 440 million USD. This proposal of Runergy has just received the approval in principle of the Standing Committee of Nghe An Provincial Party Committee.

With the investment adjustment of 147 million USD, Runergy's project will increase its capacity by 24,255 tons of silicon bars/year and 1,515 million semiconductor wafers/year. These are the first steps in Runergy's investment plan in Vietnam. If everything goes well, Runergy will increase its total investment capital in Vietnam to 1.2 - 1.4 billion USD.

Although not the only large-scale project invested in Vietnam recently, it is in the field of semiconductor manufacturing, one of the hottest investment fields globally recently.

The next step, after a series of large investors in the high-tech sector, have moved their supply chains to Vietnam. If Intel, Samsung, LG can be considered the first generation of high-tech investors, then Goertek, Quanta Computer, Pegatron, Compal are the next generation of investors. And now, Runergy, Amkor…

In early May, Nam Dinh province granted an investment certificate to Quanta Computer to build a $120 million factory in My Thuan Industrial Park. Quanta is Apple’s MacBook manufacturing partner. Therefore, the appearance of this group means that the “giant” Apple is continuing the trend of shifting production to Vietnam.

Since the Covid-19 outbreak globally, Apple has continuously called and requested its manufacturers to move out of China and Vietnam is one of the top choices.

Not only the electronics sector, when the global semiconductor industry is in crisis, opportunities have opened up for emerging manufacturing centers, including Vietnam. Besides Intel, which is continuing to expand its investment in Vietnam, global semiconductor manufacturers are also looking to it. Runergy and Amkor are examples.

Amkor’s $1.6 billion factory in Bac Ninh is expected to be operational by the end of this year. Meanwhile, Samsung will soon start mass-producing semiconductor components in Thai Nguyen.

Since late last year, CNBC has assessed that Vietnam is emerging as an alternative manufacturing location besides China for global chip manufacturers. Consulting firm KPMG said that the number of clients asking about expanding chip production capacity in Southeast Asia has increased by about 30-40% compared to before the pandemic.

“Businesses are seeing the benefits of diversifying their supply chains rather than relying on just one place… Recent geopolitical developments are expected to accelerate these already existing strategies,” commented a KPMG representative.

Recent information about the US banning domestic companies from investing in high-tech fields such as semiconductors, microelectronics, quantum information technology, artificial intelligence... in China, or the European Commission (EC) and the UK are also studying to make similar moves... is believed to bring Vietnam great opportunities to become a new center of the global value chain, not only in the electronics sector, but also in semiconductors - a key industry of the 4.0 industrial revolution.

Don't miss the opportunity

“Multinational companies are diversifying their production and supply chains due to concerns about geopolitical tensions and supply chain disruptions. Therefore, Vietnam will be prioritized in diversifying this supply chain. Vietnam will also receive foreign investment in connecting the supply chain, given its position as a trade and manufacturing hub,” said Brian Lee Shun Rong, a macroeconomic researcher at Maybank Investment Bank.

This is well-founded. Foreign investment capital is indeed still moving into Vietnam. In the first 8 months of 2023, Vietnam attracted 18.15 billion USD of foreign investment capital, an increase of 8.2% over the same period. Cumulatively, after more than 3 decades, more than 453 billion USD of foreign investment capital has been registered in Vietnam. Of which, nearly 287 billion USD has been realized, making Vietnam one of the economies that has achieved great success in foreign investment cooperation.

Notably, of the total registered capital of more than 453 billion USD, investment in the processing and manufacturing sector alone accounted for more than 60%, with more than 272.2 billion USD. The large investment capital flow, combined with the trend of shifting global production and supply chains, has turned Vietnam into not only a production center, but also a center of the global supply chain.

However, the reality is that China remains an irreplaceable manufacturing location and supply center. In a newly published report, Savills experts said that China is still the “world’s factory”, accounting for about 30% of global output. This country possesses outstanding competitive advantages such as relatively complete infrastructure, high-quality human resources and the ability to deeply integrate into the global supply chain.

Although, according to Mr. Thomas Rooney, Senior Manager, Industrial Real Estate Department, Savills Hanoi, when looking for options outside of China to relocate manufacturing plants, Vietnam emerges as an ideal destination with its close geographical distance, skilled labor at competitive costs and heavily invested infrastructure, there are also certain challenges.

EuroCham, in its report on the BCI Business Confidence Index for the second quarter of 2023, also emphasized that the shift of manufacturing activities from China to Vietnam has been slower, with a significant difference between plans and reality.

It is difficult and impossible to compare with China. But to become the choice of the “China +1” strategy, and to become the center of the global supply chain, Vietnam probably needs to prepare much more. In terms of institutions, policies, land, human resources and infrastructure, including energy.

Source: https://baoquocte.vn/hon-3-thap-ky-thu-hut-fdi-viet-nam-dang-tro-thanh-trung-tam-chuoi-cung-ung-cua-the-gioi-240642.html