There was a great article in Bloomberg News this morning that featured why Foreign Direct Investments of technology companies continue to grow in Vietnam. Both Intel and Samsung are two featured companies that are moving to or expanding operations in Vietnam. East West built the first of our three-factory-Vietnamese complex in 2006 for several reasons. Since we all like short lists, here are three reasons why we choose Vietnam:
(1) Geo-political Diversity. Around our office we like to say, “Are you putting all your eggs in the China basket.” For 30 years China was known as the “only game in town” when it came to high quality – lower cost manufacturing. Though China still has advantages for certain types of manufacturing, that is no longer the case. Vietnam is a real manufacturing option today, and a supply chain there is insulated in many ways from China.
(2) Financial. Labor cost, taxes and currency are considerations. It’s no secret that labor costs continue to grow, especially in China. Did you know the market labor rate in Vietnam is roughly 1/3 the market labor rate in China? Currency is Vietnam is much more stable than China where currency continues to steadily appreciate against the $US. Vietnam is hungry for direct foreign investment, offering significant tax incentives that complete the financial advantage picture.
(3) Infrastructure. The word Vietnam conjures up forty-year old images in most people’s minds. That’s simply not the case anymore, as can be seen from the picture of Ho Chi Minh City. This is a growing county with new port facilities, highways, and skyscrapers. Manufacturers move to Vietnam because it has a rich natural raw material base. One example is rubber. The subtropical climate in Southeast Asia is very conducive to growing rubber trees. Vietnam also has the world’s third largest bauxite ore reserves. Bauxite is a key raw material used to produce aluminum. Therefore, Vietnam is known for its aluminium manufacturing capabilities. (China must import this raw material, therefore cannot always compete with Vietnam).
Natural resources + Infrastructure = Supply Chain.
East West has been growing in Vietnam for six years and adding more plastic injection molded products and components, electrical assemblies, and full box builds for our customers every year. We have invested heavily in Vietnam and I think you will see the trend continue.
I was in Vietnam two months ago, hosting a Fortune 500 customer at our facility, and will be back again soon. If you ever have any questions about whether Vietnam would be a good alternative to source your engineered plastic, metal, or electrical products, drop me an email or give me call. I’d be happy to talk with you.
Jeff Sweeney, EVP/CMO East West Manufacturing, Atlanta, GA 404-252-9441