The global supply chain landscape has been significantly reshaped by a series of geopolitical challenges over the past few years. These challenges have prompted companies to rethink their strategies, particularly in terms of the localization of manufacturing plants and of the entire supply chain.
COVID-19 Pandemic
The COVID-19 pandemic was a major disruptor, exposing vulnerabilities in global supply chains. Lockdowns and restrictions led to severe disruptions in the flow of goods, causing delays and shortages. Companies began to prioritize supply chain resilience, leading to a shift towards diversifying suppliers and relocating manufacturing closer to end markets or more reliable locations . The 2020-2022 events that led to a complete standstill in production in China resulted in the development of the so called “ China + 1” policy, where Chinese and foreign China-based manufacturing enterprises initiated the transition of some activities to South East Asia, India and even reshoring to America.
Election of Donald Trump and New Tariffs
The election of Donald Trump and his administration's trade policies introduced significant changes. The imposition of tariffs on imports from countries like China and Mexico created uncertainty and increased costs for businesses. These tariffs forced companies to reconsider their supply chain strategies, often leading to nearshoring or onshoring of manufacturing to mitigate risks associated with international trade.
Destabilization of Democracy in Romania
Recent political instability in Romania and South Korea may also further disrupt global supply chain in the future, particularly for Italian and other European companies with manufacturing plants in the eastern region of Europe. These brief lapses of democracy have led to concerns about the reliability and stability of operations. This has prompted companies to evaluate alternative locations for their manufacturing plants to ensure continuity and minimise risks.
Strategic Localization of Manufacturing Plants
In response to these challenges, companies are increasingly adopting strategic localization of manufacturing plants. This involves relocating production closer to key markets to reduce dependency on long and complex supply chains. Factors influencing these decisions include the availability of raw materials, proximity to markets, lower costs, and the stability of the political environment.
In summary, the combination of the COVID-19 pandemic, trade policies under the Trump administration, and political instability in many regions has driven a significant shift in global supply chain strategies. Companies are now focusing on building more resilient and localized supply chains to navigate these geopolitical challenges effectively.
The “ten percenters” + 1 (Taiwan), such as Vietnam, Malaysia and Thailand are the countries less likely to be affected by Mr Trump upcoming imposition of harsher tariffs directed at China and Mexico. Other fast emerging economies such as Indonesia and Cambodia may also soon enter the global supply chain arena.
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Foreign companies, especially Chinese, are investing and hiring more staff in Vietnam to shift their production to the country or expand.
In the first half of the year recruitment and payroll services provider Adecco saw a 10% year-on-year jump in demand for personnel in manufacturing.
The positions included specialists and senior quality assurance and supply chain managers with a common requirement being moderate proficiency in Chinese.
Headhunter Navigos Search reported that manufacturing companies with Chinese investment are shifting to or expanding their operations in Vietnam.
They require a diverse workforce, with 68.3% preferring experienced personnel and nearly 22% seeking management skills.
Navigos Search added that demand has increased in the high-tech, components, electronics, and automobile sectors.
According to recruitment firms, the recent surge in labour demand in the manufacturing sector indicates that foreign companies are embracing the supply chain shift to Vietnam.
This year Vietnam has received foreign investment worth US$18 billion, up 11% from the same period in 2023.
The world’s second largest economy has been one of the top investors this year, with Hong Kong and mainland China accounting for $2.53 billion or 23.4% of new FDI.
More Chinese companies are relocating due to the China Plus One strategy, which involves diversifying production.
FDI disbursement hit a four-year high of $12.55 billion, with most of the money going into industrial zones in the north.
In the second quarter Bac Ninh Province attracted several new investments such as Taiwanese electronics giant Foxconn’s 14.26-hectare circuit board plant worth $383 million in its Nam Son – Hap Linh Industrial Park.
More development projects are being launched in anticipation of higher demand from foreign clients as Hai Phong is one of three localities attracting the most FDI in the country.
In fact, the demand is so high that foreign firms are even looking at industrial zones that have not been completed yet.
Abstract from VN Express International by Vien Thong August 12, 2024
Indian billionaire Gautam Adani is planning to invest $2 billion in the Lien Chieu Port in Da Nang, aiming to enhance the logistics capabilities of the city.
He also expressed his intention to invest $2.8 billion in the Vinh Tan 3 Thermal Power Plant located in central Binh Thuan Province, during a meeting with Vietnamese Prime Minister Pham Minh Chinh on Wednesday.
Adani has shown interest in constructing the second phase of Long Thanh International Airport in Dong Nai Province and Chu Lai Airport in Quang Nam Province.
Vietnam infrastructure is getting a further boost to emphasized its critical role as a key transshipment centre for Southeast Asia and Asia.
Credit for content given to VN Express International (Viet Tuan)
Photo by Nhat Bac
Full article available here: https://e.vnexpress.net/news/business/companies/indian-billionaire-gautam-adani-considers-2b-investment-in-da-nang-s-lien-chieu-port-4776193.html
L’industria dei semiconduttori in Vietnam sta vivendo una fase di crescita significativa, con importanti sviluppi nella ricerca, produzione, packaging e controlli di affidabilità. Il recente Webinar organizzato da VinFuture InnovaConnect, intitolato “Advanced Semiconductor Systems for a Sustainable World,” ha fornito preziose informazioni su questo settore. La collaborazione tra HUST (Hanoi University of Science and Technology), punto tecnologico di riferimento nel panorama locale) con universita’ coreane su progetti di interesse per Samsung e Hyundai e sviluppati in Vietnam costituiscono un’indicazione sul potenziale tasso di crescita del settore in Vietnam. Il Webinar organizzato da VinFuture e’ il primo di molti eventi simili programmati per l’immediato futuro con lo scopo di creare punti di contatto e scambio tra aziende, universita’ e istituti di ricerca. Il comparto industriale dei semiconduttori e’ considerato dal governo vietnamita di interesse strategico dal punto di vista sociale, politico ed economico. Gli obiettivi fondamentali espressi da governo in relazione al comparto in esame sono:
L’Università di Scienza e Tecnologia di Hanoi (HUST) è un attore chiave nella ricerca sui semiconduttori in Vietnam. In particolare, anche attraverso scambi di collaborazione tra istituti di ricerca vietnamiti e internazionali sta portando avanti importanti programmi nella progettazione di nuovi materiali, dispositivi e tecnologie. La ricerca e’ focalizzata su dispositivi MEMS e sensori per applicazioni nel Smart Environment Monitoring, Health, AI & Robotics, Mobility, Smart Factory e Aerospace. HUST ha sviluppato propri processi produttivi interni a supporto delle attivita’ di R&D.
I progetti illustrati nel corso del Webinar spaziano dalle nuove tecnologie ai nuovi materiali e processi produttivi per MEMS e sensori. I progettivi innovativi si sviluppano soprattutto su dispositivi a consumi ultra-low e ultra-small dimensions, attraverso la nano- tecnologia. Uno sviluppo strategico per HUST e i suoi partners e’ il programma “Beyond Silicon” nel quale si concentrano maggiormente gli investimenti e la ricerca e che e’ fondamentale per HUST nell’acquisire il vantaggio tecnologico nella transizione dal silicio ai nuovi materiali. Altro progetto in corso e’ relativo alla tecnologia nanophotonics applicata ai MEMS.
Il Vietnam sta emergendo come un hub per la produzione di semiconduttori. Le fabbriche di semiconduttori (FABs) stanno investendo in infrastrutture avanzate per la produzione di wafer. La partnership tra HUST e altre istituzioni globali sta contribuendo alla formazione di una forza lavoro altamente qualificata per la produzione di semiconduttori. Il settore della produzione dei semiconduttori e’ in grande fermento, trascinato da aziende e istituti locali di progettazione e produzione:
Le società straniere di assemblaggio, packaging e testing stanno giocando un ruolo cruciale nell’affermarsi dell’industria dei semiconduttori relativamente allo sviluppo economico del paese. Queste aziende seguono una visione di entrata del mercato vietnamita, presentandosi in anticipo come partner di riferimento per occupare spazi che attraggono sempre piu’ interesse da parte delle imprese straniere.
Il Vietnam ha il potenziale per diventare un importante attore globale nell’industria dei semiconduttori. La collaborazione tra università, industria e governo è essenziale per sfruttare appieno questa opportunità. Investimenti in ricerca e sviluppo, formazione della forza lavoro e infrastrutture sono fondamentali per il futuro successo del settore, esigenze alle quali il governo sta rispondendo con efficienza e visione. La crescente domanda di dispositivi elettronici e l’adozione di tecnologie emergenti aprono nuove prospettive per la produzione, il packaging e i controlli di affidabilità dei semiconduttori in Vietnam. Le aziende straniere operanti nel settore e che hanno gia’ investito in Vietnam e continuano ad investire in modo massiccio sono, tra le altre:
Intel has initiated the expansion of its Phase 2 chip verification plant in Ho Chi Minh City, involving an investment amounting to a staggering $4 billion, signalling a major shift in the global supply chain has become increasingly evident. For instance, besides the recent strategic moves and multi-billion dollar commitments from Apple and Intel, Danish conglomerate Lego is investing in a factory in the southern province of Binh Duong with an outlay of $1 billion.
“Several prominent American corporations, such as Boeing, Google, and Walmart, have announced plans to extend their supplier networks and manufacturing bases in Vietnam following extensive research into the local investment environment,” he added.
Particularly noteworthy is the colossal shift by Samsung in relocating its entire mobile phone production line predominantly to Vietnam and India. Remarkably, 60 per cent of Samsung's global smartphone output is now manufactured in Vietnam.
This migration of manufacturing groups to Vietnam offers local businesses enhanced access to Western markets and an influx of foreign direct investment (FDI), especially from Northeast Asia. Major conglomerates such as Foxconn, Luxshare, Pegatron, and Wistron are also expanding their existing manufacturing bases in Vietnam.
“The rapid influx of foreign capital, particularly in the electronics sector, is evident. Samsung’s investment in the largest research and development centre in Southeast Asia, valued at $220 million in Hanoi, serves as a testament. Another key player, Hansol Electronics from South Korea, recently secured investment permission for two projects in the southern province of Dong Nai, amounting to $100 million.”
To stay ahead and cater to these industry giants, VASI asserts that local governments need to formulate stronger policies to ensure domestic businesses possess the capability to assimilate technologies and compete sustainably in the market.
Relocating your supply chain and production to Vietnam might be a wise strategic move. Indeed, the coronavirus outbreak has emphasized the country’s reliance on China for supply. However, international manufacturers are aware of the need to minimize this reliance after the pandemic, which compelled them to consider a viable option for relocating industrial manufacturing.
Vietnam as Asia’s next manufacturing hub
China is no longer an enticing place for US and European manufacturers to move their operations due to growing wages, labour costs, environmental destruction, and economic difficulties. Among the numerous publications discussing the relocation of production from China to the next manufacturing powerhouse, Vietnam is consistently at the top of the list, with several accolades.
The government will continue to invest in critical infrastructure and multimodal transportation networks in the future to reduce logistics costs and accommodate higher-value projects. To keep long-term investors, they must also streamline onerous administrative and customs procedures and increase communication between the economic sectors.
As a result, current patterns indicate a development in this direction. The current healthcare crisis and the rising suspicion of China are anticipated to amplify this tendency.
The attractiveness of the Vietnamese workforce to relocate your supply chain
Vietnam has depended on one of its most significant assets to navigate these global transitions: a cheap and skilled worker force.
The country presently has a population of 97 million people. According to the most recent demographic estimates, this number is anticipated to increase to 120 million by 2050. Due to its large population, the Vietnamese market is a significant source of potential customers. At roughly 10.6 million, Vietnam’s workforce is the largest in the area, with a significant proportion of migrant labour. Large cities and industrial clusters like Vietnam’s Ho Chi Minh City, Binh Duong, and Dong Nai have a high concentration of labour.
In 2019, the median age in Vietnam is 30.9 years, making it a young country. According to official estimates, the labour force accounts for around 75% of Vietnam’s total population. On the other hand, over 40% of the country’s population is under the age of 24, indicating the entry of a new generation into the labour market in recent years.
Credits for content given to Dezan Shira Asia Briefing
Credits for content given to Savills Vietnam
Map of Vietnam property of WorldAtlas
The selection and the appointment of new suppliers is a fundamental process that must be embedded in any corporation’s overall strategy when approaching a new marketplace. The correct planning and implementation of a supply chain policy will ensure a reliable, consistent, on-time, high-quality flow of components, parts and sub-assemblies to the production lines in order to fulfil the customers’ orders in a timely fashion.
Manufacturing costs as well as labour and CAPEX/OPEX costs have steadily increased in most of China’s Special Economic Zones over the past few years. This has, in turn, created a rethinking of the manufacturing strategies for foreign enterprises some of whom have relocated their operations back to their home countries or to other perceived competitive regions such as Eastern Europe and South-East Asian countries.
