Vietnam: The New Kid on the Electronics Manufacturing Block

The pressure to locate manufacturing facilities in low-cost countries is relentless in the electronics industry. Electronics manufacturers have determined that in order to obtain the best value and take advantage of the latest technology, they need to have facilities in countries like China , India and Singapore . Over the past year or so, there is a new kid on the block in regard to electronics manufacturing, and it's called Vietnam.

As the electronics industry evolves and matures in other low-cost countries, companies are now looking at Vietnam for new competitive advantages. Located midway between China and Singapore, Vietnam is in an opportune position to access Thailand and other attractive markets in Southeast Asia and already has developed a sufficient rail and road network.

Vietnam prides itself on its highly educated and motivated workforce. As opposed to the migrant workers typical in countries like China, Vietnamese employees go home at night to their families as a result of the multitude of stable communities located near established industrial parks.

Japanese electronics manufacturers have been investing in Vietnam for years, and other countries are starting to understand the unique advantages Vietnam has to offer. With a population of close to 80 million, Vietnam is rapidly embracing cutting-edge technologies. Foreign investment is growing rapidly, and its diverse international culture is open to new business opportunities. Risk factors such as terrorism are considered lower in Vietnam than in other low-cost manufacturing regions. As an added bonus, the beaches and resorts of Vietnam have been famous destinations for international travelers for years.

High speed Internet access is readily available in most hotels and Internet cafes are plentiful. Once Vietnam enters the World Trade Organization in late 2006, a rapid advance into the electronics manufacturing market is predicted. The Vietnamese government is actively courting high tech companies to provide good jobs for its well-trained workforce and offering attractive incentives to foreign corporations.

From all indicators, Vietnam appears to be on the precipice of becoming a critical link in the global electronics supply chain. When electronics manufacturers look at outsourcing strategies, there is more to the equation than simply low labor rates. A reliable infrastructure, stable regulatory institutions, education and the country's social and political relationship to the rest of the world are all critical factors. Aspects like literacy rates and education levels are the "intangibles" that can have just as much bearing on successful outsourcing as low labor costs. A well-educated workforce, solid infrastructure and supportive government are mandates for success, regardless of labor cost. Vietnam offers all three.

Intel is investing $300 million in a semiconductor manufacturing and assembly facility in Vietnam. Avnet Electronics plans to have direct employees in Vietnam within 12 to 24 months. Jabil continues to expand its operations in China and India, but has stated that they too are very interested in the growing foreign investment, rapidly developing infrastructure and increasingly educated workforce in Vietnam. The proximity to the well-established electronics supply base in China has been cited by numerous electronics companies as a key driver of interest in Vietnam.

For a more detailed look at Vietnam's emergence in the electronics industry, please see:

"Intel Inside TM - Vietnam" by Jennifer Read,
Director of Client Services for Technology Forecasters Inc.
EMSNow - March 16, 2006
www.emsnow.com/npps/story.cfm?ID=17900