In the final post of our ‘Navigating Vietnam: The First Steps Series,’ we covered Vietnam’s Key Economic Regions, and touched on some of its key sectors and industries. Now, we dive in deeper to cover some of the key trends and opportunities in Vietnam’s Manufacturing Sector.
Manufacturing in Vietnam
It’s no secret that the backbone of Vietnam’s economy is manufacturing. Roughly a quarter of Vietnam’s $400 Billion (USD) GDP comes directly from manufacturing, with that percentage increasing drastically when peripheral economic impacts from manufacturing on supporting industries are considered.
This isn’t by accident. Vietnam has carefully positioned itself to be a manufacturing powerhouse, combining its strategic geography with policies that have attracted hundreds of billions of dollars in foreign-direct investment by way of offering a cost effective destination for upgrading, processing and assembly of products destined for export around the globe.
Hundreds of industrial parks are in operation across the country, and designations such as the Export-Processing-Enterprise (EPE), coupled with free trade agreements and numerous investment incentives, create ample opportunities for manufacturers to succeed in Vietnam.
Trends in Vietnam’s Manufacturing Sector
Traditional manufacturing in Vietnam has always been about cost. Low cost, labor intensive production for export of textiles, garments, and basic assembled goods were the cornerstone of Vietnam’s rise to industrialization.
More recently, however, a major shift has been underway as increases in labor costs, supply chain challenges and the rise of other low-cost manufacturing hubs have caused a pivot to occur towards the development of an advanced manufacturing sector.
Additionally, demand for higher-value production capabilities, particularly as a result of global China-Plus-One strategies and supply chain diversification trends, have created market demand for Vietnam to offer capabilities in advanced manufacturing.
By moving from low-cost, labor intensive production systems towards advanced manufacturing, Vietnam is increasingly capable of producing higher-value products while maintaining its longstanding cost-competitiveness by means of innovation, automation and technology.
The increased utilization of automation, hi-tech equipment and skilled labor is supporting traditional sectors such as textiles, food processing, electronics and furniture to become more efficient. It has also given rise to new industries, such as precision fabrication, semiconductor and automotive manufacturing.
However, there is still a long way to go as capacity remains limited. Skilled worker shortages, input material supply chain stability, and the need for capital investment remain as challenges. These challenges, however, also present exciting opportunities.
Opportunities Overview
1. Establish a Factory
If your business is involved in manufacturing, there are many advantages to moving your production to Vietnam by way of establishing your own facility. Numerous incentives are available for foreign-direct investors, and while industrial land costs are increasing, Vietnam is likely to remain cost competitive for years to come, particularly for hi-tech manufacturers.
2. Source Products from Vietnam
If you are a wholesale distributor or direct-to-consumer business, Vietnam can be an excellent place to source your product from. Partnering with the right local manufacturing facility for OEM/ODM production can save cost, and provide advantages of supply chain diversification and tariff-free import to your country of choice. From electronics to precision fabrication to injection molding and everything in between, Vietnam should be on your radar as a production solution of choice.
3. Support Capacity Growth
There is a major need in Vietnam for solutions that will support continued capacity growth. From specialized equipment and machinery, to technology and skills training solutions, Vietnam is a growing market for products and services that will boost productive capacity. Additionally, for investors seeking to become a part of Vietnam’s manufacturing sectors, investing in a local manufacturing company to support their capacity growth and expansion goals can be an excellent opportunity.
The Bottom Line
Vietnam’s manufacturing sector is ripe with opportunities: From establishing a factory, to sourcing products, to supplying the solutions to grow capacity and capability, Vietnam should not be overlooked.
The Herbers Agency is ready to help you understand the local manufacturing ecosystem, find the right partners, and provide on-the-ground support to ensure your manufacturing project in Vietnam is successful.
Contact us today to learn more and to begin your Vietnam journey.
