Apple CEO Tim Cook recently pledged to buy more components from Vietnam, highlighting a growing trend among global tech firms to diversify their supply chains away from China. Cook made this pledge during a meeting with Vietnamese Prime Minister Pham Minh Chinh in Hanoi, where he stated that Apple has already spent nearly $16 billion in the country since 2019 and created over 200,000 jobs. The company is looking to enhance cooperation and investment activities in Vietnam, signaling the country’s increasing importance to global companies as a manufacturing hub.
Vietnam has benefitted significantly from multinational companies seeking to diversify their manufacturing hubs, a strategy known as “China plus one.” With labor costs in Vietnam’s manufacturing sector nearly half of those in China, the country has transitioned from producing low-value products to higher-value tech items like iPhones and iPads. This shift has attracted significant foreign direct investment, with Vietnam pulling in over $4.29 billion in the first two months of the year, mostly in the processing and manufacturing sector.
Fast-growing Asian economies like Vietnam and India have emerged as alternative locations for manufacturers seeking to reduce their dependence on China. Vietnam’s abundance of trained engineers makes it a prime location for tech companies looking to move up the value chain. The United States and Vietnam have strengthened their diplomatic ties, with the value of US imports from Vietnam increasing over 360% in the past decade. This has positioned Vietnam as a destination for critical technologies like semiconductor chips.
Companies like Intel have taken notice of Vietnam’s rise, with the company committing $1.5 billion in 2021 to a facility near Ho Chi Minh City. The deteriorating relations between the United States and China, along with disruptions caused by the pandemic, have highlighted the risks of concentrating production in a single location. Vietnam’s youthful and educated population serves as a draw for foreign tech companies looking to hire skilled workers and target consumers. The country’s economy is expected to grow faster than the global average, making it an attractive destination for foreign investment.
Vietnam’s advantages also include a booming smartphone market and a population of over 100 million. Despite its smaller market size compared to India, Vietnam’s appeal to foreign firms lies more in its supply chain potential. India, on the other hand, offers opportunities for both supply and demand. The country’s tech sector is rapidly evolving, positioning it as a key player in the global manufacturing landscape. With its strategic partnerships and economic growth projections, Vietnam is poised to continue attracting foreign investment in the coming years.
