From Coffee Beans to iPads: Vietnam’s Rise as a Manufacturing & Tech Hub

From Coffee Beans to iPads: Vietnam’s Rise as a Manufacturing & Tech Hub

Are you seeking to expand your manufacturing or tech business into Southeast Asia? Look no further than Vietnam. With its dynamic and resilient economy, Vietnam offers unparalleled opportunities characterized by its robust manufacturing capabilities, a thriving tech sector, and a wealth of government incentives. Discover why you should consider Vietnam as your next market for your business expansion.

Robust Manufacturing Capability

Vietnam’s manufacturing sector is a powerhouse, supported by its strategic location, competitive labor costs, and well-developed industrial parks.

Strategic Location and Cost-Effective Labour

Many businesses have historically heavily relied on Chinese manufacturing due to their cost-effectiveness, but increasing geopolitical tensions in the form of tit-for-tat tariffs between the US, China, and their allies coupled with COVID-19 border closures have exposed the fragility of the global supply chain. Thus, Vietnam’s proximity to China has increased its significance as a strategic alternative for manufacturing operations; cities like Hai Phong are merely 865 km from China’s manufacturing hub of Shenzhen, reducing freight costs and minimizing supply chain disruptions for your business. Additionally, Vietnam’s minimum wages range from US$140 to US$202, approximately half of China’s wages, allowing your business to reduce overhead costs and maintain healthy margins.

Industrial Parks and Diverse Sector

Vietnam’s industrial parks offer comprehensive facilities, logistical support, and tax incentives. Located across North, Central, and South Vietnam, these parks are strategically positioned near major ports and established manufacturing plants. Key industrial sectors include:

  • Garment and Textile: Vietnam is a global leader in textile manufacturing, home to around 7,000 companies employing 2.7 million people across Vietnam
  • Automotive and EV Batteries: With key players like Ford, Honda, and Toyota operating plants in North Vietnam, this sector has posted 10% growth annually
  • Electronics: Vietnam is home to around 2,000 companies employing 612,000 people, with notable companies like Samsung and LG establishing manufacturing hubs
  • Food, Beverage, and Feed Processing: Dominated by about 5,500 companies, Vietnam is a leading exporter of rice, coffee, and seafood, fulfilling both local and international demand

Thriving Tech Opportunities

Vietnam is rapidly emerging as a tech hub, with its digital economy and tech-savvy population driving growth in various sub-sectors.

Digital Economy Growth

By 2025, Vietnam’s digital economy is expected to reach US$57 billion. Largely driven by the e-commerce, gaming, and fintech industries, Vietnam is also home to four unicorns. Additionally, the ICT industry generated US$164.6 billion in revenue in 2022, marking a 12.7% increase from 2021. The country is also a major player in semiconductor manufacturing, generating over 50% of the total semiconductor market revenue in the Asia-Pacific region. This remarkable growth is also facilitated by government initiatives such as the National Digital Transformation Program, which aims to propel Vietnam into the top 50 countries in information technology and the top 35 in the Global Innovation Index by 2025. Most significantly, Vietnam benefits from a young, tech-savvy workforce; approximately 68.9% of the population is of working age, with a smartphone penetration rate of 66.7%, fueling this growth and providing fertile ground for your business to thrive.

Major Tech Investments

Global tech giants are increasingly investing in Vietnam. Apple has invested $15.84 billion, creating 200,000 jobs, and manufactures iPads, AirPods, and Apple Watches in the country; Nvidia has invested over $250 million and partnered with FPT to build a $200 million AI factory for developing AI applications and solutions, including autonomous driving technologies. These Foreign Direct Investments (FDIs) have cemented Vietnam’s position as “China plus one”, a term coined to signal Vietnam’s growing importance as an alternative manufacturing hub.

Attractive Government Incentives

Vietnam’s government has created a favorable environment for foreign investment through various incentives and trade agreements.

Free Trade Agreements

Vietnam has signed several key FTAs, including the Regional Comprehensive Economic Partnership (RCEP), the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), and the EU-Vietnam Free Trade Agreement (EVFTA). These agreements provide trade advantages to many countries, enhancing market access and reducing tariffs. They open doors to markets comprising billions of consumers, acting as a springboard for your business to reach untapped segments.

Double Tax Avoidance Agreements (DTAAs)

Vietnam has signed DTAAs with over 80 countries, eliminating double taxation and reducing tax liabilities for foreign investors. This network of agreements makes Vietnam an efficient base for regional and global operations, minimizing the tax burden on your business.

Tax Incentives

Vietnam offers preferential corporate income tax (CIT) rates and tax holidays for certain sectors, particularly those deemed high-tech, large-scale, or socially important by the government. This includes reduced tax rates and tax exemptions, significantly boosting the financial attractiveness of investing in Vietnam. For instance, if your business qualifies as a high-tech company, you may be entitled to a CIT rate of just 10% for 15 years, along with up to four years of tax exemption followed by a 50% reduction in tax payable for the subsequent nine years.

Vietnam - The Bottom Line

Vietnam’s robust manufacturing capabilities, burgeoning tech sector, and favorable government incentives make it a compelling destination for business expansion. The strategic location, cost-effective labor, thriving digital economy, and supportive regulatory environment collectively provide fertile grounds for growth and profitability. So what are you waiting for? Expand your business into Vietnam today and unlock your company’s full potential.

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