Vietnam’s cost advantage has drawn investments from U.S. and South Korean technology companies, whose exports have overtaken garments and provided a bright spot for a government struggling to revive economic growth.
Intel Corp. (INTC), Samsung Electronics Co. (005930) and Jabil Circuit Inc. (JBL) are among a growing roster of companies setting up or expanding in Vietnam, spurring exports amid a global slowdown that has damped demand for goods from other Asian nations. Shipments of mobile phones and other electronics from Vietnam surged 91 percent in the first 10 months of the year to $16 billion, making them the biggest source of export revenue.
Vietnam’s shipments of electrical machinery, a category that includes modems, telephones and wiring sets, to the U.S. climbed 58 percent in the first eight months of the year, according to the U.S. International Trade Commission. By comparison, China’s sales to the U.S. in the category rose 11 percent, Malaysia’s grew 4 percent, Thailand’s slid 5 percent and Indonesia’s fell 16 percent in the period, the data showed.
Jabil, a Florida-based electronics manufacturer, plans to increase its total investment in a factory in Ho Chi Minh City that currently makes point-of-sales terminals and routers to $100 million from $50 million over the next three years, said Mike Matthes, senior vice president of global operations.
The company may employ as many as 5,000 workers in Vietnam within five years, up from 1,400 now, Singapore-based Matthes said in an e-mail. Jabil’s three top clients were Apple Inc. (AAPL), Cisco Systems Inc. (CSCO) and Research in Motion Ltd. last year, based on company filings.
Samsung plans to invest $ 700 million in a new mobile-phone plant in northern Vietnam, Yonhap News reported Oct. 13. The plan marks the second phase of its investment in the country, with an annual production capacity at its first plant at 150 million units, Yonhap News reported.
Production at Intel’s $1 billion factory in Ho Chi Minh City is “ramping up smoothly,” said Rick Howarth, general manager of Intel Products Vietnam. Intel opened its assembly and testing plant in Ho Chi Minh City in 2010, the largest such facility for the world’s largest semiconductor maker.
“We’re looking to increase the complexity of work that’s being done in Vietnam,” Howarth said. “Over time we can expect to see an ecosystem of high-tech design and manufacturing grow in Vietnam, increasing the country’s relevance in the industry globally.”
Japan’s Nidec Corp., the world’s biggest maker of disk- drive motors, said in June it would open its seventh Vietnamese factory in Ho Chi Minh City by the end of the year. Its workforce in Vietnam’s biggest city will reach 25,000.
Vietnam is also benefiting from a move by manufacturers to diversify away from China, said Alessandro Parimbelli, a Bergamo, Italy-based senior vice president of global business units at Jabil.
“We’re trying to offer alternatives to our customers for whom some products are made in China, who whether because of the currency’s appreciation or for other reasons, don’t want to have all their eggs in one basket,” Parimbelli said. A “much cheaper” cost structure in Vietnam also contributed, he said.
“The days of very large trade deficits in Vietnam seem to be over,” said Johanna Chua, the Hong Kong-based head of Asian economic research at Citigroup Inc. “Part of that is due to weaker imports, but Vietnam is also benefiting from a structural transition. A lower trade deficit means that concerns about foreign-exchange risks should dissipate and reserves should be more ample, which improves confidence in the currency and in overall macroeconomic stability.”