Four decades after the fall of Saigon and the unification of the country, Vietnam has re-invented itself. Not too long ago, Vietnam was known as a hub of clothing manufacturing. Today it’s achieving a reputation in the tech sector that is magnetizing foreign investors. Cited as one of the top ten developing cities for startups by CNN, Vietnam is quickly garnering attention as a bustling tech hub with an array of major players moving in.
Expanding its production facilities in Ho Chi Minh City, Intel will produce the majority of its chips in Vietnam once the transition is complete. Director of Intel Products in Vietnam, Sherry Boger says the company “plans to produce 80 percent of CPUs for the global market in Vietnam,” including Intel’s Haswell central processing unit. Haswell is the name of Intel’s 4th generation chip, which is used world-wide in smartphones and computers.
So far, electronics behemoth Samsung has pumped $12 billion into its operations in Vietnam. And by 2017, Samsung’s investment is expected to reach $20 billion. The company is constructing a new manufacturing plant, designated Samsung CE Complex, in Ho Chi Minh City. Projected cost of the complex is $1.4 billion. Samsung states that “the complex will be used for addressing mid to long-term demand for consumer products globally.” The plant will be operational by the beginning of 2016.
Even ExxonMobil is preparing to jump into Vietnam, where the gas and oil multinational would like to develop an off-shore natural gas field, along with constructing a pipeline and a new processing facility. To accomplish this, Exxon is ready to dump $10 billion into Vietnam.
Just last month, at the end of March, LG began operations at its newly constructed $1.5 billion facility in Hai Phong. LG will manufacture auto-infotainment devices, televisions and smartphones at the facility. The company plans on investing a further $3 to $5 billion in Vietnam over the next five years.
So what’s going on? Why is Vietnam suddenly a hotbed of high-tech investment? Let’s take a look.
First and foremost is the cost of labor. The average monthly salary in Vietnam is $197, which is much lower than China’s $613. Along with cheap labor is the intangible of loyalty: most Vietnamese workers work in high-tech because they like it. And according to Josh Lieberman, fostering this loyalty goes “beyond paying lip service to these things and actually showing your employees that you care.”
Other factors attracting investment include easy access to China and an educated and skilled workforce. Large numbers of Vietnamese young people travel across the ocean to attend U.S. universities. Of the 100,000 Vietnamese college students that studied abroad in 2013, 24,000 attended top-notch universities in the U.S. After graduation from schools like Stanford, Cal Tech and MIT, they go home. Thus, there is an educated and skilled pool of techies for companies to draw from.
The Vietnamese government is doing everything it can to nurture the invasion of foreign capital. English is taught in the public schools. Taxes breaks are common, along with tax holidays. And the import/export regulations that formerly hemmed in IT and electronics have been eased. Ho Chi Minh City officials have implemented an expedited tax filing and payment system.
Of course, in the last week there was a general strike over government pension plans, which blemished Vietnam’s reputation. But most experts expect the Vietnamese government to handle the problem quickly, since it affects the country’s continued economic growth.
The next decade should see more and more tech companies realizing the advantages of moving to Vietnam. English-speaking, skilled workers abound; the political and economic climate is conducive to profitability; and many visionary companies have already made the decision. In other words, nothing succeeds like success.