Vietnam: Rising Star in Electronics

I recently returned from a trip to Southeast Asia, including Vietnam. The trip was for pleasure, not business, but I could not help but notice the boom in economic activity. The coastal cities of Hai Phong, Da Nang and NHA Trang were trying to outdo each other in building hotels, bridges and amusement parks – largely to cater to foreign tourists. A trip up the river to Ho Chi Minh City (previously Saigon) revealed many huge industrial buildings including several under construction.

How does Vietnam fit in the electronics industry? The chart below shows exports of electronic equipment for key Asian nations from the World Trade Organization (WTO). The data excludes semiconductors and components. China remains the dominant Asia electronics exporter with US$477 billion in 2013. The next largest exporter is South Korea at $49 billion. Vietnam is eighth at $18 billion. However over the five years from 2008 to 2013 South Korea, Japan, Malaysia and Singapore have declined in electronics exports. Thailand and Taiwan each had a compound annual growth rate (CAGR) of only 2% from 2008 to 2013. Vietnam had an explosive 43% CAGR. Although the growth rate of Vietnam electronics exports is certain to slow in the next few years, Vietnam could eventually challenge South Korea as the second largest Asian exporter of electronics.

Vietnam had a population of 89.7 million in 2013 and a labor force of 53.2 million. The labor force is fairly young compared to many industrialized countries, with 50% under 40 years old. Total mobile phones exceed the population with smartphones at 23% of the population. 41% of the population are internet users, the same percentage which own motorbikes. If you have ever seen the bedlam on Ho Chi Minh City roads, it does appear everyone is using a smartphone while riding their motorbike.

[TABLE] border=”1″
|-
| style=”width: 188px” | Vietnam
| style=”width: 180px” | Millions, 2013
| style=”width: 163px” | % of population
| style=”width: 187px” | Source
|-
| style=”width: 188px” | Population
| style=”width: 180px” | 89.7
| style=”width: 163px” | 100%
| style=”width: 187px” | Vietnam government
|-
| style=”width: 188px” | Labor force
| style=”width: 180px” | 53.2
| style=”width: 163px” | 59%
| style=”width: 187px” | Vietnam government
|-
| style=”width: 188px” | Mobile phones
| style=”width: 180px” | 140
| style=”width: 163px” | 156%
| style=”width: 187px” | IDC
|-
| style=”width: 188px” | Smartphones
| style=”width: 180px” | 21
| style=”width: 163px” | 23%
| style=”width: 187px” | IDC
|-
| style=”width: 188px” | Internet Users
| style=”width: 180px” | 36.6
| style=”width: 163px” | 41%
| style=”width: 187px” | Internet live facts
|-
| style=”width: 188px” | Motorbikes
| style=”width: 180px” | 37.0
| style=”width: 163px” | 41%
| style=”width: 187px” | Vietnam government
|-

Foreign direct investment in Vietnam in 2013 totaled US$21.6 billion, according to the government. The largest investments by country were Japan at 27%, Singapore and South Korea each at 20%, and China at 11%. Electronics companies with significant investments in Vietnam include Samsung Electronics, LG Electronics, Microsoft’s Nokia division, Intel, Foxconn (Hon Hai) and Jabil. Vietnam experienced steady GDP growth ranging from 5.2% to 6.4% each year from 2008 to 2013 despite the global recession in 2009. There have been some problems recently. In May 2014, many Vietnamese protested a dispute with China by rioting and damaging many factories in Vietnam. Although Chinese-owned factories were targeted, some factories owned by Taiwanese, Japanese and South Korean companies were also damaged. The government appeared to successfully end the protests.

Vietnam has taken inspiration from China, having a capitalist economy with a communist government. Vietnam is well situated geographically – bordering China, in the center of Southeast Asia, generally less susceptible to the natural disasters (earthquakes, tsunamis and typhoons) other countries in the area have experienced, and with several good ports along over 2000 miles of coastline. Vietnam is on its way to becoming a significant country in electronics manufacturing and semiconductor consumption.