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Tech firms shift operations from China to Vietnam, where FDI is on the rise

Tech firms shift operations from China to Vietnam, where FDI is on the rise

Friday, August 26, 2022, 08:12 GMT+7
Tech firms shift operations from China to Vietnam, where FDI is on the rise
A factory owned by Taiwan’s Hon Hai Technology Group (Foxconn) in Vietnam. Photo: D.T. / Tuoi Tre

As part of their diversification of production away from China, many tech businesses are moving their operations to Vietnam, which has emerged as a highly desirable destination for an investment shift thanks to its welcoming business climate.

By such diversification, electronics makers are hoping to strike a balance amid Washington-Beijing tensions, Nikkei Asia cited Eddie Han, a senior analyst with Isaiah Research, as saying.

“Geographically, we find major international electronics brands such as Apple and Samsung trying to lower dependence on making products inside China," Han explained, adding that these moves are likely meant to balance geopolitical conflict.

“On the other hand, these international players are adopting more China-based suppliers, such as Luxshare and BYD for Apple, and Huaqin for Samsung.”

Chinese suppliers themselves are also looking to diversify their production activities in order to buffer against geopolitical issues.

One of these suppliers is Luxshare Precision Industry, a Chinese supplier for U.S. tech giant Apple who recently partnered with Taiwan-based Foxconn to start trial production for the Apple Watch in northern Vietnam with the aim of producing the device outside of China for the first time, Nikkei Asia said.

Manufacturing the Apple Watch would be a win for Vietnam, which is currently attempting to position itself as a desired location for tech manufacturing.

Google, Dell, and Amazon have also begun setting up production facilities in Vietnam, according to Nikkei Asia.

Vietnam and many other countries, including India and Mexico, are becoming increasingly attractive to contract manufacturers supplying Apple’s brands as they aim to diversify production away from China, according to Reuters.

Pattarapong Kanhasuwan, executive vice-president of Thailand’s Kasikorn Bank - Kbank, told Tuoi Tre (Youth) newspaper that the bank’s customers have been trending toward overseas investment and Vietnam has emerged as one of the most prominent destinations for foreign direct investment (FDI).

A factory complex run by South Korea’s Samsung in the Hi-Tech Park in Thu Duc City, Ho Chi Minh City, Vietnam. Photo: Quang Dinh / Tuoi Tre

A factory complex run by South Korea’s Samsung at Hi-Tech Park in Thu Duc City, Ho Chi Minh City, Vietnam. Photo: Quang Dinh / Tuoi Tre

Such customers not only include Thai businesses, but also companies from Japan, South Korea, and China which operate in the manufacturing, industrial real estate, commercial real estate, commercial products, and consumer goods sectors, Pattarapong elaborated.

He believes that tech innovations related to digital technology and mobile banking will be effective tools to support micro-, small-, and medium-sized enterprises in Vietnam.

An annual report released by ESP Capital and Cento Ventures indicates that Vietnamese startups attracted more than US$1.3 billion in investment in 2021, putting Vietnam in the third place in ASEAN’s startup ecosystem following Indonesia and Singapore.

As a result of the U.S.-China trade war, China’s FDI has shifted to ASEAN to reach $16.1 billion in 2020, accounting for 10.5 percent of total FDI outflows from China, Kbank said, citing an analysis of data from the United Nations Conference on Trade and Development.

In particular, the FDI outflow from China to Vietnam has also increased to $1.9 billion in 2020 from an average of $1.4 billion in the 2018-19 period.

Mohammed Alwahedi, Vietnam country manager of Emirates, one of two flag carriers for United Arab Emirates, told Tuoi Tre that he noticed many businesses from around the world have shifted their operations to Vietnam over the past two years.

Like Apple, other giants are considering further investments in Vietnam because of their existing infrastructure and human resources in the nation, Alwahedi commented.

Emirates has seen great development potential in Vietnam’s transportation industry that has benefited from the continued growth of FDI, Alwahedi said, adding that the airline will open more flights to keep up with the increasing market demand.

Last year, Vietnam’s FDI reached $31.15 billion despite COVID-19 impacts, representing a year-on-year expansion of 9.2 percent, according the General Statistics Office.

Over the first seven months of this year, disbursement of FDI to Vietnam amounted to $11.57 billion, up 10.2 percent from a year earlier, the Ministry of Planning and Investment reported.

During this period, additional investment into the existing foreign-invested projects in Vietnam also saw a sharp rise of 59.3 percent to $7.24 billion, the ministry said.

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Vinh Tho - Nguyen Hanh / Tuoi Tre News


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