Vietnam continues its supply chain ascendency

Demand and interest for goods manufactured in Vietnam, that had been growing steadily, has accelerated since the pandemic, with some of the biggest suppliers to global tech companies already in Vietnam, where Apple has been producing millions of AirPods.

Since the late 1980s Vietnam has transformed from a controlled economy to a more open and capitalist model, while its cheap and well-educated workforce has attracted manufacturers and while initially synonymous with fashion and footwear, it is increasingly associated with higher-end electronics.

Vietnam was the fastest-growing economy in Asia last year (+8%) and generated $22.4bn from foreign direct investment (FDI) projects in 2022, up 15% on 2021, with big names including Dell, Google, Microsoft and Apple shifting parts of their supply chain to the country in recent years.

The country’s infrastructure is improving and becoming more modern, but the biggest attraction for investors and overseas buyers is cheap labour, which is abundant and likely to remain so for the medium term and maybe longer – for low-skilled workers.

There is already some tightening in the skilled-labour market, which producers of electronic equipment are noticing. In Haiphong, a Taiwanese company hopes to attract 20,000 workers, who they will probably source from outside the city limits, to be homed (like their Chinese counterparts) in dormitories.

In Hanoi, other technology manufacturers are also considering building dormitories, as they plan workforce increases and the skilled-labour market gets more difficult.

Vietnam’s highly qualified young people also expect to earn three to four times more than the monthly minimum wage, which for the biggest cities is 4.68mn dong ($198).

As Vietnam develops, it maintain close ties to China’s crucible of manufacturing around the Pearl River delta, which is just 12 trucking hours away, allowing the easy transfer of materials.

Rapid export-led growth has transformed Vietnam in the years we have been present there and we expect to see the government further bolster its business environment, raising its productive capacity to meet the growing demands of manufacturers as it continues to attract the attention of Western buyers seeking alternative, quality source for supply.

The UK’s membership of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) includes tariff-free trade with Vietnam, Australia, Canada, Japan, Mexico, New Zealand, Singapore, Peru, Malaysia and Chile.

As opportunities to trade with Vietnam and other CPTPP members?emerge, our team in Vietnam provide resilient, consistent and reliable air and ocean supply chain solutions for UK and US customers.

To discuss any of the issue raised here, or to learn more about our capabilities in Vietnam, talk to Stefan Holmqvist 4034

, our Managing Director in Asia.