Vietnam – The World’s Emerging Supply Chain Hub

A Key Player in the Global Supply Chain

After 78 years of independence and more than three decades of opening up to foreign investment, Vietnam has solidified its role as a vital link in the global supply chain. This is an achievement to be proud of.

Just a few days ago, Mr. Choi Joo Ho, CEO of Samsung Vietnam, visited 12 enterprises receiving support under the Smart Factory Development Assistance Project (Phase I/2023), accompanied by Korean and Vietnamese experts. Witnessing the remarkable transformations in these companies, he expressed optimism that they would continue improving and achieving greater success in the future.

“Samsung hopes that this Smart Factory collaboration project will enhance the competitiveness of Vietnamese enterprises nationwide, creating opportunities for them to join not only Samsung’s supply chain but also the broader global supply network,” Mr. Choi Joo Ho emphasized.

Since making major investments in Vietnam, Samsung’s total investment has exceeded $20 billion. The company has actively sought, connected, and integrated Vietnamese businesses 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 tenfold, from 25 enterprises in 2014 to 257 by the end of 2022.

Though this number may not yet meet expectations, major investors such as Samsung, Intel, and LG have elevated Vietnam’s economy, enabling it to integrate deeper into the global value chain.

Vietnam – A Global Electronics and IT Hub

A decade ago, few would have imagined that Vietnam could become a global center for IT and electronics manufacturing. But today, the landscape has changed.

According to Mr. Choi Joo Ho, more than 50% of Samsung’s global smartphone production now comes from Vietnam.

Similarly, Mr. Kim Huat Ooi, Vice President of Manufacturing, Supply Chain & Operations and General Manager of Intel Products Vietnam, emphasized the importance of Intel’s Vietnam factory.

With an investment of $1.5 billion, Intel Products Vietnam has shipped over 3.5 billion units and now manufactures Intel’s most advanced chipsets, including 5G, IoT, and the latest 13th-generation Intel Core processors.

The shift of investment flows into Asia-Pacific, particularly into high-value industries, has drawn increasing attention from international investors.

According to Mr. Christopher J. Marriott, Managing Director of Savills Southeast Asia, Vietnam has emerged as a leading destination with its manufacturing capabilities meeting the high expectations of international investors and major tech corporations.

In the first eight months of 2023, despite a decline compared to the previous year, Vietnam’s exports of electronics, computers, and components, as well as mobile phones and accessories, still exceeded $70 billion, accounting for nearly 30% of the country’s total exports ($227 billion).

This remarkable figure would not have been possible without the contributions of Samsung, Intel, LG, Foxconn, Luxshare, and Goertek, all of whom have continued investing heavily in Vietnam.

“Vietnam has transformed into a rising star in the global supply chain, securing a significant global market share in industries such as textiles, footwear, and consumer electronics,” HSBC noted in a recent report.

Of the five export sectors surpassing $10 billion in the first eight months of 2023, besides electronics and machinery, textiles and apparel reached over $22.3 billion, and footwear exceeded $13.4 billion.

Driven by U.S.-China trade tensions and the COVID-19 pandemic, many global tech giants have shifted their supply chains to Vietnam.

A New Global Supply Chain Hub?

Shortly after receiving its investment registration certificate for a $293 million project in the Hoang Mai I Industrial Park (Nghe An Province), Runergy PV Technology Co., Ltd. decided to increase its investment to $440 million. This expansion was recently approved by the Nghe An Provincial Party Committee.

With an additional $147 million, Runergy’s project will increase its production capacity by 24,255 tons of silicon ingots per year and 1.515 billion semiconductor wafers annually.

This move is just the beginning of Runergy’s long-term investment strategy in Vietnam. If successful, Runergy’s total investment in Vietnam could reach $1.2 – $1.4 billion.

This development aligns with a broader trend of global semiconductor supply chain shifts. If Intel, Samsung, and LG represent the first wave of high-tech investors, companies such as Goertek, Quanta Computer, Pegatron, and Compal are the second wave, followed by Runergy and Amkor.

In May 2023, Quanta Computer—Apple’s MacBook manufacturer—received investment approval for a $120 million factory in Nam Dinh Province’s My Thuan Industrial Park.

Apple has been urging its suppliers to shift production out of China since the COVID-19 pandemic, and Vietnam has emerged as a top alternative.

Beyond electronics, the global semiconductor crisis has created new opportunities for emerging manufacturing centers like Vietnam.

Vietnam’s semiconductor industry is rapidly expanding, with Intel increasing its investments and new entrants such as Runergy and Amkor joining the market.

• Amkor’s $1.6 billion factory in Bac Ninh is set to begin operations by the end of 2024.
• Samsung will soon mass-produce semiconductor components in Thai Nguyen.

Since late 2023, CNBC has recognized Vietnam as a rising alternative to China for global chip manufacturers. KPMG also reported a 30-40% increase in inquiries from clients about expanding chip production in Southeast Asia compared to pre-pandemic levels.

“Companies are seeing the benefits of diversifying supply chains instead of relying on a single location… Recent geopolitical developments are accelerating pre-existing strategies,” KPMG analysts commented.

With the U.S., the EU, and the UK tightening investment restrictions on China’s high-tech sectors, Vietnam stands to gain significant opportunities to become a new global supply chain hub—not only in electronics but also in semiconductors, a key industry in the Fourth Industrial Revolution.

Seizing the Opportunity

“Multinational corporations are diversifying their production and supply chains due to geopolitical tensions and supply chain disruptions. Vietnam is well-positioned to benefit from this diversification strategy. The country is also attracting significant foreign investment into its supply chain networks as a regional trade and manufacturing hub,” noted Brian Lee Shun Rong, macroeconomic researcher at Maybank Investment Bank.

This statement is well-founded. Foreign direct investment (FDI) continues to flow into Vietnam.

• In the first eight months of 2023, Vietnam attracted $18.15 billion in FDI, an 8.2% increase year-on-year.
• Over 30 years, cumulative FDI has exceeded $453 billion, with nearly $287 billion disbursed, making Vietnam one of the most successful economies in attracting foreign investment.
• More than 60% of FDI ($272.2 billion) has gone into manufacturing and processing, reinforcing Vietnam’s role as a major global manufacturing hub.

However, China remains an irreplaceable manufacturing powerhouse, accounting for 30% of global production.

According to Savills, China’s well-developed infrastructure, skilled workforce, and deep integration into the global supply chain continue to give it a competitive edge.

While Vietnam’s geographic proximity, skilled labor, and rapidly improving infrastructure make it an attractive alternative, challenges remain.

To solidify its “China +1” strategy and become a global supply chain hub, Vietnam must enhance its policies, workforce development, and infrastructure, particularly in land availability and energy supply.

The window of opportunity is open—Vietnam must act decisively to claim its place as a key player in the global supply chain revolution.