After Foxconn, Foreign Investors will Continue to Bustle in Vietnam
The news of Foxconn's Fukang Technology factory project receiving the certificate of investment registration from Bac Giang marks a big step in the company's production expansion journey in Vietnam. Detail of the factory is mentioned in the table below:
In fact, information about the Taiwanese corporation building an assembly line for Apple iPad tablets and MacBook laptops at a factory in Bac Giang province has been mentioned by news agencies since November 2020.
During the meeting with representatives of Bac Giang Provincial People's Committee, Foxconn Vietnam's General Director, Trac Hien Hong, said that by the end of December 2020, the total investment capital of the corporation in Vietnam was about $USD 1.5 billion. The investment capital in Bac Giang province alone is estimated at $USD 900 million. The head of Foxconn Vietnam also revealed that the group plans to increase investment in Vietnam by about $USD 700 million in 2021.
Vietnam becoming an attractive destination to invest in for many tech giants
In September 2020, Pegatron - a manufacturing partner of Apple, Microsoft and Sony - revealed its plan to pour $ 1 billion into three projects in Dinh Vu Industrial Park (Hai Phong), according to documents from the Ministry of Planning & Investment sent to the Prime Minister.
Specifically, the document said that since March, Pegatron's first project in Vietnam with an investment of $USD19 million has received the investment registration certificate of the Hai Phong Economic Zone Authority.
At the same time, Pegatron said that they intend to continue investing in the second and third factory projects in Vietnam, with capital of 481 million and 500 million USD respectively.
In addition to Foxconn or Pegatron, Luxshare ICT and Goertek - two partners specializing in assembling audio equipment for Apple - are simultaneously active in Vietnam from the middle of June 2020, with continuous recruiting posts. Worker positions in the factory are usually asked to “immediately start working."
For Luxshare ICT, news from Vietnamnet shares that they have decided to relocate a part of Apple AirPods assembly line to Bac Giang (Vietnam). The group may also start an iPhone assembly line there, according to some sources.
The common point between Foxconn, Pegatron, Luxshare ICT, and Goertek (beside being official suppliers of Apple) is that they have decided to locate factories in the Northern provinces of Vietnam.
Trade expert Stephen Olson of the Hinrich Foundation said that the event was "a reflection of the production chains moving away from China’s trend over a long period of time".
Over the past two years, Vietnam has become an attractive destination for many large technology corporations. In 2020 alone, at least 4 out of 20 official suppliers for Apple in Vietnam show that they are preparing to put the factory into operation in 2021 or even preparing for longer plans.
Northern Provinces become a golden land for industrial investment
There are many reasons that make Northern provinces an attractive option for large enterprises.
The close proximity to China (which supplies components for assembly and manufacturing, and infrastructure)
Improvements in traffic in recent years
The cost of investment in the Northern provinces appeals to large corporations when compared to the South, which limited space to expand business
The Council also mentioned the movement of technology corporations on a global scale to Vietnam will create a “spillover” effect, first by attracting supporting businesses to follow, then coming enterprises in other sectors such as digital economy or e-commerce.
Challenges for Vietnam
“The downside of the medal in the current situation is whether Vietnam can absorb this investment sustainably without causing environmental degradation or reducing labor standards,” says the Hinrich Foundation.
US - ASEAN Business Council also mentioned Vietnamese supporting enterprises still have many difficulties to "step in" the already-stable supply chain of global "players". In fact, Vietnamese domestic firms with current capacities do not have an easy opportunity to participate in the capital injection chain that is sustainably maintained by many rigorous systems of standards.
One reason for China’s relocation trend was shaped by the China + 1 strategy before the US - China Trade war. In addition, the more flexible approach policies of the US President Joe Biden administration will create a necessary time for businesses to arrange their business activities and consider destinations more carefully.
The question is whether Vietnam will really benefit if the fourth FDI wave takes place more slowly under the Biden administration. "Sure", Mr. Vu Tu Thanh, Deputy Director of US- ASEAN Business Council commented.
"I believe that a stream of quality investment, instead of quantity, will be more beneficial to Vietnam because Vietnam has time to improve its capacity and absorb all the value that the new investment wave has brought".
Forecast for the coming time, US - ASEAN Business Council said that the next investments will be announced scatteredly, not concentrated. In the bigger picture, the wave of shifting production chains of enterprises out of China will continue, but not too rapidly.
Mr. Thanh also shared that the number of US businesses that came to the US- ASEAN Business Council to discuss and learn about investment opportunities in Vietnam has increased again in the 4th quarter of 2020 and the first weeks of 2021. Some businesses have contacted to continue the "unfinished stories" before Covid-19 happened, and "I believe that activities of foreign investors will be bustling again by the end of this year," Thanh predicted.
As an investor, keeping yourself constantly updated on these cases of large investment, especially cases from big brands will help you stay relevant in the market and predict future market trends. Interested to know deeper in Vietnam's business opportunities? Contact Broad Avenue Team right now for professional consultation and service.