Vietnam aims to be at the center of the global production and supply chain

Vietnam is increasingly asserting its important position in the global supply chain, in a volatile geopolitical context.

Vietnam to host International Federation of Freight Forwarders Association meeting in July

Vietnam is increasingly asserting its important position in the global supply chain. (Source: VnEconomy)

Seize the opportunity to move

A few days ago, Mr. Noriaki Koyama, Vice President of Japan's leading retail group Fast Retailing, visited Vietnam. During a meeting with Deputy Prime Minister Tran Luu Quang, Mr. Noriaki Koyama said that since starting business in Vietnam in December 2019, Fast Retailing has committed to expanding its business and retail network nationwide, increasing domestic production output and training and developing human resources in Vietnam.

After nearly 4 years, Fast Retailing has always strived to fulfill that commitment. Currently, Fast Retailing has opened and operated 18 UNIQLO brand stores in the Vietnamese market. More importantly, according to Mr. Noriaki Koyama, UNIQLO has become a purchasing partner of 45 garment factories in Vietnam to supply the Vietnamese and world markets. "Vietnam has become the Group's second largest production base," said Mr. Noriaki Koyama.

Thus, Vietnam is gradually participating more deeply in UNIQLO's global supply chain. And not only in the textile and garment sector - which has long been Vietnam's strength, but this also happens in many other fields, especially electronics, phones, etc.

In turn, Samsung and LG have poured billions of dollars into Vietnam to turn it into a global manufacturing base and an indispensable link in their global supply chain. At the end of June 2023, LG increased its investment capital by another 1 billion USD in the LG Innotek Factory, specializing in the production of electronic components for the automotive, mobile, and phone camera module industries.

Meanwhile, after pouring billions of dollars into factories in Bac Ninh and Bac Giang to shift production to Vietnam, Foxconn has received an investment registration certificate to deploy two factories specializing in the production of electronic components, chargers, electric vehicle charging controllers, etc. in Quang Ninh. The total investment capital of the two projects is up to nearly 250 million USD, thereby raising Foxconn's total investment capital in this province to 300 million USD.

In addition to Quang Ninh, Foxconn is planning to invest in a large-scale project in Thanh Hoa. Meanwhile, Compal and Quanta Computer (Taiwan) have received investment certificates for projects worth hundreds of millions of USD to produce electronic devices, including products of the “giant” Apple in Vietnam, to diversify the supply chain outside of China.

Runergy - a Chinese brand has also just invested through a subsidiary in Thailand in a factory specializing in the production of silicon bars and semiconductor wafers in Nghe An. The project has a total investment capital of up to 293 million USD. Minister of Planning and Investment Nguyen Chi Dung personally awarded the investment certificate to Runergy, during the recent visit to China by accompanying Prime Minister Pham Minh Chinh.

Semiconductors are an attractive investment sector that more and more foreign investors are shifting to Vietnam. Samsung is a typical example. At the end of this year, Amkor - a big name in the semiconductor sector, will officially put its billion-dollar factory in Bac Ninh into operation.

“Vietnam is becoming an important link in the supply chain as investors decide to pivot and shift production to other countries, amid increasing geopolitical competition between countries,” the Financial Times commented in a recent article.

Become the center of the global production chain

“Vietnam is producing more than 50% of Samsung’s global phone output,” said Choi Joo Ho, General Director of Samsung Vietnam. This information is not exactly new, but in the current difficult market context, many foreign investors have to reduce production, it is a meaningful affirmation, showing that Vietnam has become the center of the global production chain, even if at first it is only in some fields.

Although foreign investment flows are slowing down, domestic and foreign economic experts believe that Vietnam will benefit as multinational companies diversify their production and supply chains due to concerns about geopolitical tensions and supply chain disruptions.

In a recently released report, Savills Vietnam said that after 3 years of disruption due to the pandemic, the global supply chain is showing positive changes, gradually returning to a stable state. In that context, in the Asia-Pacific region, China is still the "factory of the world".

However, according to Jack Harkness, Director of Logistics and Industrial Services, Savills Asia Pacific, cost remains a strong driver in location decisions. Rising labor costs in China are not necessarily driving companies already based in China out of the market, but there may be a slowdown in setting up new facilities there.

Many companies with facilities in China are looking to expand, rather than replace existing factories. For example, Apple has announced plans to diversify away from China. Siemens has also said it is looking at other locations in Southeast Asia,” said Jack Harkness, adding that this is an opportunity for Vietnam, as many companies are starting to look for other manufacturing hubs in the Asian region.

“Vietnam is attracting a large number of foreign investors,” said John Campbell, Associate Director of Savills Vietnam Industrial Services. According to him, the northern region, as every year, has seen high demand in the electronics industry. In the south, demand is very diverse, from logistics, fast-moving consumer goods, pharmaceuticals, food and beverage.

This is evidenced by the number of large-scale projects that have been granted investment registration certificates since the beginning of the year. Although the trend is still downward, which Mr. John Campbell said is due to “a lot of stagnation in signing new leases”, “many foreign companies have been considering Vietnam this year and they are still looking to enter the market”.

Mr. John Campbell expects that by the end of the year, Vietnam's economy will have a spectacular turnaround and that will be the time when there will be more promising signals for manufacturers, investors and logistics companies.

Perhaps it is no coincidence that recently, investors have poured capital into the industrial real estate sector. VSIP will invest more in Nghe An, Can Tho... Sumitomo is expanding Thang Long Industrial Park II (phase III) and plans to continue investing in expanding phase IV. Meanwhile, Deputy Prime Minister Le Minh Khai recently approved the investment policy for the Long Duc 3 Industrial Park Infrastructure Construction and Business Investment Project (Dong Nai)...

All is to anticipate the shifting investment capital flow, when Vietnam becomes the center of the global production and supply chain.

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