VietnamCredit
VietnamCredit About Us Cafe€redit Contact Us API
Login Register
0
USD
Go to cart
Checkout
Vietnam: a shift from low to high value manufacturing

Vietnam: a shift from low to high value manufacturing

Friday 17, 01 2020
Once attracting foreign investment into the field of manufacturing garments and footwear because of cheap labor costs, Vietnam is now a manufacturer of high-value added goods, bringing benefits to the economy, and it is expected that, sooner or later, the country will take China’s place of world’s leading consumer electronics manufacturer.

Garments and footwear only? No, things have changed

According to several Korean news agencies, LG Electronics informed that this year, it will cut back on smartphone production in its home country and move to Vietnam. Meanwhile in Vietnam, Vingroup is about to launch 4 Vsmart phone models to serve the growing middle class in the country.

According to Voice of America, this shows that Vietnam is no longer a country that is well-known for producing footwear and textiles for export only like before: "The export structure has witnessed a major change in value added", said chief economist Rajiv Biswas of IHS Markit, a market research firm in the Asia-Pacific region. Analysts said investing in a series of factories producing phones, computers and accessories such as headsets currently leads Vietnam's growing value chain.

Smartphones has led Vietnam's export value when they brought in a total of USD 45.1 billion in 2017, and computers and some other electronic items ranked third (25.9 billion USD), following garments. According to the consulting firm Dezan Shira & Associates, electronics generally takes the top position in Vietnam's export portfolio.

In which way is Vietnam adding value to goods?

When Vietnam joined the World Trade Organization (WTO) in 2007, textiles and footwear accounted for the largest proportion of the country’s export structure, said Mr. Maxfield Brown - senior expert of Dezan Shira & Associates in Ho Chi Minh City. 

However, he also said that electronics exports also began to "take off" around the same time. Enterprises in Vietnam only have to pay workers half that of companies in China. This advantage has helped Vietnam transform itself into one of the fastest growing economies in Asia today. Universities and business training programs have also equipped Vietnamese workers with essential skills, with which they can manufacture electronic components as well as assemble finished goods.

According to Biswas, Vietnam is now a leading alternative in the field of electronics manufacturing, especially when China loses its position due to the trade war with the US. Vietnam's growing middle class also contributes to the value chain. If Vietnam's GDP per capita increased from last year’s USD 2,587 to USD 5,000, car sales would increase and thus attract car manufacturing plants.

Vietnam: a shift from low to high value manufacturing

 

Biswas calculates that these car manufacturers can sell their products to a part of the total population of 95.5 million Vietnamese as well as export to foreign countries. Investors specializing in manufacturing ancillary equipment such as tires and leather seats will come after car manufacturers. One-third of Vietnamese will be middle- or higher- class next year, Boston Consulting Group predicts.

 

New "players" in the field of electronics manufacturing

Analysts now agree that electronics is Vietnam's most valuable export product. "In certain industries, I started to see the specialization among many countries," Mr. Brown commented.

In April, a Korean news agency named Hankyoreh informed that LG was planning to move its smartphone production to the port city of Hai Phong after suffering loss for 15 consecutive quarters. LG declined to comment on the information. After Samsung Electronics invested more than USD 17 billion in factories and research & development centers in Vietnam, LG may follow its “home fellow”.

 

According to Voice of America, Samsung is currently Vietnam's largest exporter. The company and the processor developer Intel are among the first major foreign technology companies to transfer production to Vietnam.

 

In addition to foreign businesses, Vingroup is also planning to launch and sell Vsmart phones in December and has recorded good reviews of the specifications of this new series compared to other low-cost devices, said Mr. Vo Le Tam Thanh - senior market analyst at technology research company IDC. According to Mr. Biswas of IHS Markit, there is still a lot of space in the technology sector in Vietnam for the development of more advanced equipment.

>>> 
Top 10 technology companies in Vietnam 2019​

Categories
Economy News

You may also like

Fitch: Vietnam's credit rating upgraded
Monday 17, 02 2020

Fitch: Vietnam's credit rating upgraded

Fitch Ratings has moved up the outlook on Vietnam's long-term foreign-and...
VietnamCredit became an official member of Vietnam Export Support Alliance (VESA).
Wednesday 11, 03 2020

VietnamCredit became an official member of Vietnam Export Support Alliance (VESA).

Vietnam Export Support Alliance (VESA) has created a cross-sectoral service...
0
0
+84 981861066