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VietNam News/Asia News Network
July 10, 2015, 12:06 am TWN
Vietnam's electronics sector is becoming a force in Asia. While electronics exports from Asia rose by 17 percent between 2010-14, Vietnam's contribution ballooned by about 10 times, according to Singapore-based DBS group research.
The country has leapfrogged the Philippines and Thailand and will likely overtake Singapore to become the fifth-largest electronics exporter in the region over the next two years.
The electronics cluster has grown rapidly in recent years. Electronics exports have expanded by 78 percent per year for the past four years, reaching US$35 billion in 2014. Electronics accounted for 23 percent of all exports in 2014, up from a mere 5 percent in 2010. Electronics are now a key driver of the economy, accounting for 23.4 percent of GDP last year, up from just 5.2 percent in 2010.
Vietnam's electronics boom started after 2010 due to a confluence of factors. Faced with weak global demand and persistent cost pressure, many manufacturers were searching for cheaper locations from which to produce.
In addition, competition was intensifying, making the need to restructure the supply chain even more compelling. Vietnam's pro-foreign direct investment policies, a weaker currency, and competitive labor force all added more development fuel to the sector in subsequent years.
Its electronics cluster largely benefited from the structural shift in the regional electronics supply chain, as the influx of foreign electronics manufacturers enabled the transfer of technology and skills. So much so that it has now captured market shares from many of its regional peers.
The rise of Vietnam's electronics cluster is due in part to the structural shift in regional electronics supply chain. Vietnam has captured market share from many of its regional peers. In a process seen over and over in Asia, earlier players saw incomes and wages rise, opening the door for lower cost producers. Vietnam is the latest new kid on the block.
For example, after year of rapid growth, wages in mainland China are now about three times higher than in Vietnam. This has led to margin compression, forcing manufactures to relocate their production bases.
Beyond the cost advantage, geography plays a role. Vietnam's proximity to China makes it easier to integrate into existing supply chains. A growing middle class supporting domestic demand has further strengthened Vietnam's overall attractive for global manufactures.
FDI into Vietnam's manufacturing sector has picked up sharply in recent years. This has not been limited to low end labor-intensive manufacturing. Increasingly, high-tech electronics producers are establishing a presence in the country.
Intel, LG, Panasonic and Microsoft are among the global tech giants to have expanded in the country in recent years, making a shift away from China. This trend is likely to persist. Korean electronics giant Samsung Electronics, for example, announced late last week, plans to invest US$3 billion in a new smartphone factory, alongside its existing US$2 billion factory.
Bright Prospects
In the longer term, the Government expects electronics exports to reach US$40 billion by 2017. Growth of a seemingly modest 5 percent a year would achieve that target.
Nonetheless, the longer-term sustainability of the industry will depend on whether Vietnam can raise productivity and move up the value chain. The country will also need to develop its own talent pool to sustain the trend.
Otherwise, electronics will only migrate to cheaper locations once wages start to rise. Indeed, Indonesia, Cambodia, Laos, and Myanmar all represent competitive alternatives for global manufacturers.
Vietnam's electronics exports expand: Singapore's DBS - The China Post
July 10, 2015, 12:06 am TWN
Vietnam's electronics sector is becoming a force in Asia. While electronics exports from Asia rose by 17 percent between 2010-14, Vietnam's contribution ballooned by about 10 times, according to Singapore-based DBS group research.
The country has leapfrogged the Philippines and Thailand and will likely overtake Singapore to become the fifth-largest electronics exporter in the region over the next two years.
The electronics cluster has grown rapidly in recent years. Electronics exports have expanded by 78 percent per year for the past four years, reaching US$35 billion in 2014. Electronics accounted for 23 percent of all exports in 2014, up from a mere 5 percent in 2010. Electronics are now a key driver of the economy, accounting for 23.4 percent of GDP last year, up from just 5.2 percent in 2010.
Vietnam's electronics boom started after 2010 due to a confluence of factors. Faced with weak global demand and persistent cost pressure, many manufacturers were searching for cheaper locations from which to produce.
In addition, competition was intensifying, making the need to restructure the supply chain even more compelling. Vietnam's pro-foreign direct investment policies, a weaker currency, and competitive labor force all added more development fuel to the sector in subsequent years.
Its electronics cluster largely benefited from the structural shift in the regional electronics supply chain, as the influx of foreign electronics manufacturers enabled the transfer of technology and skills. So much so that it has now captured market shares from many of its regional peers.
The rise of Vietnam's electronics cluster is due in part to the structural shift in regional electronics supply chain. Vietnam has captured market share from many of its regional peers. In a process seen over and over in Asia, earlier players saw incomes and wages rise, opening the door for lower cost producers. Vietnam is the latest new kid on the block.
For example, after year of rapid growth, wages in mainland China are now about three times higher than in Vietnam. This has led to margin compression, forcing manufactures to relocate their production bases.
Beyond the cost advantage, geography plays a role. Vietnam's proximity to China makes it easier to integrate into existing supply chains. A growing middle class supporting domestic demand has further strengthened Vietnam's overall attractive for global manufactures.
FDI into Vietnam's manufacturing sector has picked up sharply in recent years. This has not been limited to low end labor-intensive manufacturing. Increasingly, high-tech electronics producers are establishing a presence in the country.
Intel, LG, Panasonic and Microsoft are among the global tech giants to have expanded in the country in recent years, making a shift away from China. This trend is likely to persist. Korean electronics giant Samsung Electronics, for example, announced late last week, plans to invest US$3 billion in a new smartphone factory, alongside its existing US$2 billion factory.
Bright Prospects
In the longer term, the Government expects electronics exports to reach US$40 billion by 2017. Growth of a seemingly modest 5 percent a year would achieve that target.
Nonetheless, the longer-term sustainability of the industry will depend on whether Vietnam can raise productivity and move up the value chain. The country will also need to develop its own talent pool to sustain the trend.
Otherwise, electronics will only migrate to cheaper locations once wages start to rise. Indeed, Indonesia, Cambodia, Laos, and Myanmar all represent competitive alternatives for global manufacturers.
Vietnam's electronics exports expand: Singapore's DBS - The China Post
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