Vietnam, the world's manufacturing hub.

Vietnam, the world's manufacturing hub - Photo 1.

The "Vietnam International Sourcing 2023" event, held from September 13-15 in Ho Chi Minh City, aims to support businesses in participating more deeply in global production chains and promote connections between distribution channels, importers, and domestic manufacturing and exporting businesses. The Ministry of Industry and Trade announced that many large global corporations have indicated their participation, including Walmart, Amazon, Boeing, Carrefour, Central Group; Coppel (Mexico), IKEA (Sweden); Aeon, Uniqlo (Japan), etc.

Furthermore, recent information from the European-American Market Department (Ministry of Industry and Trade) indicates that the American corporation Apple has completed the relocation of 11 factories producing audio-visual equipment to Vietnam; Intel is expanding phase 2 of its chip testing plant in Ho Chi Minh City with a total investment of up to 4 billion USD; and Lego Group of Denmark is investing 1 billion USD in building a factory in Binh Duong.

Manufacturing electronic devices at Foster Vietnam Co., Ltd. in VSIP 2 Industrial Park (Binh Duong) - a Japanese-invested company.

Do Truong

The emergence of large manufacturing corporations shows that Vietnam is becoming a major global manufacturing hub. Previously, foreign direct investment (FDI) companies that had an early presence in the domestic market, such as Intel, Samsung, LG, and Qualcomm, have continuously announced investment expansions. Most notably, at the end of last year, Samsung officially launched its Research and Development (R&D) center in Hanoi – the largest R&D center in Southeast Asia for the group – as part of its plan to elevate Vietnam's position beyond its role as a global manufacturing base. Currently, Samsung has shifted its entire phone production line to Vietnam and India. Approximately 60% of Samsung's smartphones sold worldwide are manufactured in Vietnam.

Through its R&D center, Samsung hopes to make a positive contribution to the development of hardware (H/W) and software (S/W) in line with advanced IT and the Fourth Industrial Revolution. In addition, the corporation is preparing the conditions for trial production of semiconductor chip grids and will mass-produce them at the Samsung Electro-Mechanics factory in Thai Nguyen . Similarly, the LG Group leadership stated that in the future, the corporation will invest another $4 billion in Vietnam, with the desire to continue investment cooperation in many fields. LG's goal is to make Vietnam a future center for manufacturing mobile phone cameras…

Manufactured by Samsung Electronics Vietnam Co., Ltd.

Pham Hung

Manufactured in Vietnam by Samsung Vietnam

Thuy Linh

In addition, a number of new companies have begun to establish a direct presence in Vietnam. For example, in 2022, Synopsys (USA) announced it would train electrical engineers in Vietnam and support the Ho Chi Minh City High-Tech Park (SHTP) in establishing a chip design center through a software sponsorship program. This is one of the few American companies that dominate the global market for electronic design automation (EDA), or chip design software. Hansol Electronics Vietnam (South Korea), a component supplier for Samsung, recently received investment licenses from the Dong Nai Provincial People's Committee for two projects with a total capital of up to 100 million USD…

Việt Nam, cứ điểm sản xuất của thế giới - Ảnh 2.

At the forum "Seizing Opportunities from New Capital Flows" held at the end of August, representatives from the Korea Chamber of Commerce and Industry (Kocham) reported that dozens of investment projects from South Korea entered Vietnam in the first seven months of 2023. Notably, some projects were valued from $700 million to billions of USD. Kocham affirmed that capital flows from South Korea to Vietnam will continue to increase in the coming period, as Vietnam is still considered a potential market by Korean companies, especially after the Covid-19 pandemic, which has led to a strong shift of foreign investors to Vietnam.

Referring to President Joe Biden's official visit to Vietnam starting today (September 10th), Professor Nguyen Mai, Chairman of the Vietnam Association of Foreign Investment Enterprises (VAFIE), affirmed that Vietnam and the US will have important cooperation projects in the technology sector in the near future. The US ranked 11th out of 141 countries and territories investing in Vietnam last year, but that only represents direct investment from the US; investment through third countries, through supply chains, etc., is actually much higher.

Việt Nam, cứ điểm sản xuất của thế giới - Ảnh 6. — *Sunshine Aerospace Components Manufacturing Plant of UAC Group (USA) in Da Nang*

Việt Nam, cứ điểm sản xuất của thế giới - Ảnh 7. — *Manufactured by Terumo Company (medical equipment), Quang Minh Industrial Zone, Hanoi. Photo by Pham Hung (12)*

Notably, the hottest issue in the recent semiconductor competition is semiconductor technology (and rare earth elements are indispensable in semiconductors). After China, Vietnam has a huge advantage in rare earth elements. In 2022, Vietnam exported 4,500 tons of rare earth elements, earning $200 million. With the potential we already have, assuming we can produce hundreds of thousands of tons of rare earth elements, the foreign exchange earnings could reach tens of billions of USD. This is not just about money, but also about a nation's standing in the world. Based on rare earth elements, human resources are being trained to become increasingly better, pushing forward the industrialization and modernization of the country.

Professor Nguyen Mai emphasized: Therefore, the opportunity, or more accurately, the prospect of Vietnam becoming an important global manufacturing hub, is entirely possible. Vietnam's advantage lies in having large, long-term investors from two powerful Asian countries, South Korea and Japan – consistently among the top 5 in FDI into Vietnam. Now, with diplomatic visits, exchanges, and meetings between high-ranking leaders from the US to Vietnam, along with the presence of major technology corporations, there is an opportunity for the two countries to further strengthen cooperation in technology. The US remains a leader in high technology, future technology, and core technology.

Việt Nam, cứ điểm sản xuất của thế giới - Ảnh 3.

"More than a year ago, Intel's representative in Vietnam stated that the corporation has three factories that utilize core technologies (including one in the US) and now wants to make Vietnam one of the key technology production locations. Therefore, in the near future, our challenge is to acquire the human resources, financial resources, and infrastructure to absorb advanced technologies from our American partners. We need more research and development to master future technologies, clean energy, semiconductors, etc.," Professor Nguyen Mai further shared.

Dr. Nguyen Quoc Viet, Deputy Director of the Institute for Economic and Policy Research at the School of Economics, Vietnam National University, Hanoi, noted that the trend of many large global corporations shifting their production to Vietnam has become clear. This is also an attractive point that Vietnam has maintained in recent years. Foreign investors appreciate positive aspects such as an improved business environment; participation in many new-generation free trade agreements; and the development of digital platforms and infrastructure. Furthermore, Vietnam's workforce remains highly skilled. While previously Vietnam was primarily a base for simple textile and footwear production, it has recently seen a significant increase in high-tech factories, electronics, and microchip manufacturing.

Manufactured by R-VN Technical Research Co., Ltd.

Pham Quang Vinh

Even factories producing leather goods, footwear, and textiles have invested in higher-tech production methods. For example, Uniqlo has announced that many products are manufactured in Vietnam to global quality standards, such as Ultra Light Down jackets, thermal shirts, fleece jackets, faux sheepskin jackets, and knitted sweaters…

"Vietnam has truly become a destination for the world's manufacturing industry in general. Besides Vietnam's own advantages, there are also other objective international factors. These include geopolitical tensions and conflicts among countries, which lead foreign investors to seek to relocate production to diversify risks, making Vietnam a suitable choice. To continue attracting new FDI flows and retaining existing investors, Vietnam must continue to improve its competitiveness and increase its ability to meet the demands of high-quality production chains that meet new criteria such as green production and green energy," said Dr. Nguyen Quoc Viet.

Việt Nam, cứ điểm sản xuất của thế giới - Ảnh 4.

With the presence of many large corporations in Vietnam, domestic businesses are expected to have many opportunities to participate in global production chains through their roles as suppliers or as a link in the overall production process of factories. However, in reality, the number of Vietnamese businesses participating in production supply chains remains small, mainly in low value-added stages.

Dr. Nguyen Quoc Viet argues that manufacturers are becoming increasingly demanding, requiring much higher standards in terms of technology, infrastructure, environment, and even human resources. In many cases, Vietnam still fails to meet the requirements of large corporations when they want to open factories in Vietnam, such as weak security technology, slow digital economy, and insufficient high-quality human resources. Therefore, instead of a greater shift of production to Vietnam, there may still be "bottlenecks" slowing this wave. Furthermore, uncertainty in some of Vietnam's policies also makes FDI investors hesitant.

Meanwhile, neighboring countries are also continuously improving their competitiveness. Therefore, Vietnam must always strive, acknowledge existing shortcomings, and develop comprehensive policies to enhance the capacity of domestic enterprises so that they can connect and participate more in supply chains with foreign corporations. Only then can it accelerate its efforts to attract more large corporations and truly become an important production hub in the global supply chain.

Việt Nam, cứ điểm sản xuất của thế giới - Ảnh 5.

Concurring, Associate Professor Dr. Dinh Trong Thinh (Finance Academy) stated that, compared to previous years and even during the pandemic outbreak, Vietnam's position in the world has changed significantly. However, Vietnam needs to focus on attracting and developing in depth, rather than breadth like China did in the past. In particular, if it becomes a manufacturing hub, Vietnam needs to prioritize increasing the proportion of added value enjoyed by Vietnamese people, instead of concentrating it in the hands of foreign investors in the supply chain or imports. For example, over 80% of components are still imported, making Vietnam completely dependent on foreign countries. Today, Vietnam must gradually reduce this percentage to 70%, then 50-60% to be successful.