Shift of 1st Generation Industries from Shoes and Textiles to Semiconductors and Electronics
New Foreign Direct Investment Soars 28% Until May
Despite the economic slowdown in Vietnam, global manufacturing companies continue to enter the local market. Companies are increasingly targeting the market based on the long-term judgment that Vietnam's economy will grow and become Asia's representative supply chain following China.
Foreign media recently reported that Chinese energy storage company Hithium plans to invest up to $900 million in Vietnam. Chinese battery manufacturer Growatt is also considering a $300 million investment in Vietnam. The foreign media stated, "More Chinese companies are starting or expanding manufacturing in Vietnam, a global export hub."
Japanese semiconductor company Meiko plans to build a factory in the Hoa Binh region of northern Vietnam for printed circuit board (PCB) production, investing $200 million. This will be the fourth factory built since its first investment in Vietnam in 2006. So far, Meiko has invested $500 million in Vietnam and employs 7,000 people.
Currently, Vietnam's manufacturing industry is undergoing rapid generational change. The first-generation industries such as footwear, textiles, and garment sectors are relocating to other countries, and their place is being filled by technology-intensive industries such as electronics, semiconductors, automobiles, and medical devices.
There are also forecasts that Vietnam will emerge as a ‘Mecca’ of semiconductor production following Taiwan. According to local media, a supplier of Dutch semiconductor equipment company ASML is reportedly exploring opportunities to diversify its business into Southeast Asia, with Vietnam being considered the top candidate.
New investments are also continuing. Although the total FDI amount in Vietnam decreased by 7% compared to the previous year, new foreign direct investment (FDI) in Vietnam from January to May this year increased by 28% year-on-year to $5.3 billion. In particular, small-scale projects under $1 million accounted for about 70% of the total. Large-scale investments have decreased due to the global economic recession, but small and medium-sized investments have increased.
As companies continue to enter, real estate companies that secure local factories and office buildings are also busy. Commercial real estate data company Allsquare Vietnam has signed lease brokerage contracts for offices and factories in Vietnam with not only domestic companies but also global companies from Taiwan, Germany, India, and others since the beginning of this year. The demand mainly comes from those starting new businesses or expanding existing ones in Vietnam. They prefer to purchase existing factories to reduce acquisition costs and save business preparation time.
An Allsquare Vietnam official said, "Although the atmosphere of the Vietnamese real estate market has not fully recovered, the demand for corporate spaces such as office buildings, factories, and land continues steadily," adding, "Allsquare, which manages factory listings of Korean companies located in Vietnam, plays a key role in the generational change of Vietnam's industrial sectors."
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