Foreign Enterprises Increase Manufacturing Relocation to Vietnam
Foreign manufacturers, especially those from China, are ramping up recruitment efforts to expand and relocate their production to Vietnam.
In the first six months of the year, recruitment and payroll firm Adecco reported a 10% increase in hiring demand for manufacturing and production roles compared to the same period in 2023. The sought-after positions include experts and senior managers in quality control and supply chain management, with a strong emphasis on Chinese language proficiency as a key requirement.
“As Vietnam continues to attract substantial foreign investment, the demand for professionals fluent in English and other languages, particularly Chinese, is rising to enhance connectivity with international partners,” Adecco stated.
Similarly, Navigos Search, a recruitment firm specializing in mid- and senior-level professionals, noted that Chinese-funded manufacturing companies are shifting and expanding their operations in Vietnam. These businesses require a diverse workforce, with 68.3% prioritizing experienced workers and 22% seeking strong managerial skills.
High-Tech Industries Drive Expansion
In terms of industry focus, manufacturers are shifting towards high-tech sectors, including components and parts production for industrial manufacturing, electronics, and automobiles. This shift has significantly boosted the demand for Chinese-speaking professionals, creating a competitive job market for bilingual talent.
“The rising demand for Chinese-speaking candidates has led to a supply shortage in the labor market,” said Trần Thị Hoàn, Deputy Director of Navigos Search Northern Vietnam.
The recent increase in recruitment within the manufacturing sector underscores the ongoing wave of supply chain relocation by foreign enterprises into Vietnam. Among these, Chinese companies are following the “China+1” strategy, which involves diversifying production outside China to mitigate risks.
In the first seven months of the year, among the 62 countries and territories investing in Vietnam, China ranked among the top investors. Specifically, Hong Kong accounted for USD 1.31 billion, while mainland China contributed USD 1.22 billion, making up 23.4% of newly registered FDI.
Global Corporations Increasing Investment in Vietnam
Beyond China, global corporations are increasingly selecting Vietnam as a supplementary manufacturing hub. According to Vietnam’s General Statistics Office, total FDI inflows (both new and additional investments) reached over USD 18 billion in the first seven months of 2024, reflecting an 11% increase from the same period in 2023. Realized FDI stood at USD 12.55 billion, marking the highest level since 2020.
Most new and expanded projects are concentrated in northern industrial zones. In Q2 2024, Bắc Ninh remained a key destination, attracting large-scale investments such as:
- Foxconn’s USD 383 million printed circuit board manufacturing plant spanning 14.26 hectares at Nam Sơn – Hạp Lĩnh Industrial Park.
- Amkor’s semiconductor materials and equipment factory in Yên Phong II-C Industrial Park, with an additional investment of over USD 1 billion.
Meanwhile, in Hải Phòng, Vietnam Industrial Park Group (KCN Vietnam) recently launched Phase 2 of its ready-built warehouse project in DEEP C Industrial Park, adding over 80,000 square meters of mixed-use warehouse space. Hải Phòng is among Vietnam’s top three provinces for FDI attraction in H1 2024, with 93% of projects focused on high-tech industries, processing, manufacturing, and logistics.
Some industrial zones (IZs) that haven’t yet received approval are already attracting potential investors. During its 2024 General Shareholders’ Meeting, Kinh Bắc Urban Development Corporation (KBC) revealed that:
- A South Korean investor is seeking 20 hectares to build a battery production facility.
- A Chinese enterprise wants 60 hectares for a kitchen appliance factory (induction cookers, ovens, etc.).
- Both projects are intended for Tràng Duệ 3 Industrial Park (Hải Phòng), which is still awaiting final investment approval.
Vietnam’s Competitive Edge in FDI Attraction
According to HSBC’s July report “Vietnam at a Glance”, Vietnam stands out as a top FDI destination, outperforming other Southeast Asian countries due to:
- Competitive costs
- Skilled labor force
- Strong integration into global supply chains
Over the past two decades, Vietnam has emerged as a major global manufacturing hub, with export growth averaging over 13% annually since 2007. The majority of this growth has been driven by foreign-invested enterprises (FIEs).
Previously, South Korea was the dominant FDI source, with Samsung leading the way. The success of early investors has encouraged other tech giants to follow suit. Last year, Chinese manufacturers alone contributed nearly 20% of Vietnam’s total newly registered FDI.
Under the “China+1” strategy, Vietnam’s key attractions include:
- Lower labor costs than China and other Asian nations
- High-quality workforce (Vietnam ranks well in the PISA international student assessment)
- Competitive energy costs (Vietnam has the second-lowest electricity prices for industrial use in Southeast Asia)
- A favorable tax regime, including:
- Corporate income tax (CIT) at 20%
- Tax exemptions, deferrals, and reductions for investors
As of May 2024, Vietnam has signed, implemented, or is negotiating 19 Free Trade Agreements (FTAs), further enhancing its export competitiveness.
Challenges and Future Outlook
Despite its strengths, Vietnam still faces challenges in attracting and retaining high-value FDI, including:
- Shortage of highly skilled labor
- Vietnam struggles to develop a workforce capable of supporting high-tech industries such as semiconductors, logistics, and maritime transportation.
- Infrastructure and Digitalization Limitations
- Inadequate infrastructure and slow digitalization efforts hinder seamless trade processes and stable energy supplies, which could affect investment decisions by global corporations.
Conclusion
Vietnam is rapidly becoming a global manufacturing powerhouse, with strong FDI inflows and continued supply chain relocations from China and beyond.
However, to sustain long-term FDI growth, Vietnam must:
- Move up the global value chain by increasing domestic value-added production.
- Invest in workforce development to support high-tech industries.
- Enhance infrastructure and digital capabilities to ensure efficient trade and logistics operations.
If Vietnam successfully addresses these challenges, it can further strengthen its role as a key player in global manufacturing and supply chains.