Vietnam

Electronics
2019

Copyright Tractus Asia Ltd. 2019

CONTENTS
1. Vietnam electronics industry 02

2. Vietnam electronics in the global value chain 03

3. Vietnam electronics FDI 05

4. Vietnam electronics export 07

5. Opportunities and challenges 09

01
Vietnam Electronics Industry
Vietnam electronics started booming after joining WTO in 2007
VIETNAM ELECTRONICS INDUSTRY
1,237 companies 1,500
1,237
800
1,145

1,000 peop le
600
No. compan ies 1,000
612,000 people 613 400

500
256 200
113
28.9 of total export
-
2000 2005 2010 2015 201 6
14% of GDP No. of companies Employment
Source: GSO Vietnam

In the early 1990s, most of the electronics manufactures in Vietnam were

state-owned, small-sized enterprises focused on assembling television, radio
cassette recorders, VCDs and DVDs from imported components. From a
hundred companies in the 1990s to 256 companies in 2005, the big boom
happened after joining WTO in 2007. Currently, there are more than 1,200
enterprises employing 612,000 people.

The electronics industry (EI) plays a crucial role in the vibrant Vietnam
economy. It accounted for 28.9% of all exports in 2017, up from 5% in 2010.
The sector has boosted Vietnam GDP, accounting for 14 % of GDP in 2017,
up from a mere 5.2% in 2010.

Vietnam’s EI is dominated by foreign-invested enterprises, generating 95%

of Vietnam electronics export turnover. Domestic enterprises participation is
very low. Global MNCs like Samsung, LG, and Intel are the industry drivers.
Most of the tier 2 investors are linked to their supply chains.

According to JETRO*, the localization rate of Japanese electronics

companies in Vietnam was 32.1% in 2015, much lower than the rate in other
countries in the region (36% for Malaysia, 40.5% for Indonesia and 55.5% for
Thailand)

The domestic production of electronic components is growing but still

underdeveloped. Domestics firms participate mainly in packaging, simple
plastics, and metal parts. The supply of electronic components and
supporting products come mainly from imports and have only been produced
in Vietnam in recent years by FDI companies. Main items include printed
boards, TV CRT, capacitors, plastic parts, mechanical parts for CRT,
antennas, and packaging.
*JETRO: Japan External Trade Organization

02
Vietnam Electronics in the Global Value Chain
Vietnam electronics export accounted for 3% of the world in 2016 and
grew at CAGR 20% from 2012 to 2016
ELECTRONICS FINISHED PRODUCTS 2016
30%

25% Vietnam

20%
CAGR 2012-2016

15%

10% China
Korea
5% Thailand Singapore
0%
0% 10% 20% 30% 40%
-5%
Malaysia
-10%
Japan
-15%
World market share 2016

The bubble size represents the export value

Asian countries dominate electronics

exports. China, Singapore, and Korea,
the three leading exporters, accounted
for 45% of world export value. Among top
electronic export countries, Vietnam
electronics exports including electronics
finished products, subassemblies and
components skyrocketed by 60% from
2008 to 2016, from a mere $3.6 billion in
2008 to nearly $57 billion in 2016,
accounting for 3% of world export in
2016.

From 2012-2016, Vietnam maintained

strong growth for all electronics finished
products, and though the total value is
still small, an average growth of around
20% is much higher than other countries
in the region. The world growth rate of
electronics finished products is negative
at 0.9%. For the electronics finished
products group, Vietnam has achieved a
5% market share, behind only China and
driven by telephones exports.

03
Vietnam has mainly engaged in the lowest value-added activities
in the global electronics value chain
ELECTRONICS “3C” GLOBAL VALUE

Upstream Mid-stream Downstream

Finished product/ Distribution/

Inputs Components Subassemblies Sale channels
Market Segments

Silicon Intergrated
Circuits Consumer Electronics Consumer Retailers
Semiconductor
Wafers
Metal Active Discrete
PCBA Product Special Parts Communications Industrial: Firms
Electronic

Plastic & Glass PCV

Computers/Storage/Office Public-Use: Institutions
Display
Chemical Passives

Packaging Enclosure/Housing
Electronical

Cables

Batteries

Vietnam’s integration in global value chain

Research and Development Design

IC Design Circruitry Design Software New product

Development

Sources: Frederick, 2017; 3C refers to consumer electronics, computers and communication devices

Vietnam only engages in the lowest midstream activities of
the electronics value chain. These are the lowest
value-added activities in the electronic value chain.
Vietnam is very dependent on imported components and
subassemblies as local production is very limited and
component imports keep growing to support exports.
Vietnam supply chain is mostly located in Asia with China,
Korea, and Japan being the main suppliers. Asia’s share of
components in Vietnam is slowly being reduced in favor of
other locations like the United States.
Upstream activities in Vietnam are very weak. Designing is
carried out abroad, the main components (electronic chip,
etc.) are imported from other countries. Only a few MNCs
have limited R&D activities in the country. Ex. Samsung,
Renesas Design Vietnam.
Down-stream: these activities are done by foreign
companies and produced outside Vietnam. Local
companies have limited international exposure and
marketing capabilities due to a lack of experience and
capital.

04
Vietnam electronics FDI
Foreign investment into Vietnam electronics sector is dominated by
Samsung & LG
VIETNAM ELECTRONICS FDI AND EXPORT VALUE

$30 $80
$25 $70
$60
$20
$50
$15 $40
$10 $30
$20
$5
$10
$0 $0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Cumulative Investment Capital Electronic exports

Sources: Tractus

Peak investment years were

2013 and 2014 with huge
investments by Samsung and
LG. Samsung and LG alone,
with their megaprojects,
represent US$ 14 billion or
50% of the total investment.
Samsung committed US$ 9
billion in projects in Bac Ninh,
Thai Nguyen, and HCMC.
LG invested US$ 3 billion in
Haiphong. However, the
number of annual FDI projects
continues to grow with
investments typically linked to
large MNCs’ value chain.
Other companies with
investment projects larger than
US$ 1 billion are Intel chip
testing and assembly
facility and Taiwan Wintek LCD
module. Other big investors
include Canon, Compal, Seoul
Semiconductors, Nokia,
Meiko, Heesung Electronic
and Jabil.

05
Electronics FDI has concentrated in two main regions, the Red River
Delta & HCMC
FDI CAPITAL BY COUNTRY OF ORIGIN 2006 - 2018

Others In the last decade, Korea has become the main investor in
5% Vietnam electronics, accounting for 69% of the total investment
Taiwan capital, followed by Japan. This trend became more evident
7% after the Samsung and LG mega projects in 2013 and 2014. The
high number of projects after 2013 are related to the Samsung
and LG suppliers that followed them into Vietnam and continue
Hongkong arriving. In the period 2006-2018, there were 653 projects related
7% to electronics from Korea.

Electronics FDI has concentrated in two main regions, the Red

River Delta and HCMC. Location wise the Red River Delta
Japan region, around Hanoi, is the preferred location for Electronics
12% companies. .
South Korea
69%
While Thai Nguyen and Hai Phong provinces have received the
largest investment capital (Samsung and LG), the real center of
the cluster is Bac Ninh province with 137 companies (each
project is larger than US$ 1 million). In the South, the main
location is the Saigon High Tech Park in HCMC that hosts Intel,
Samsung, Nidec, and Jabil, followed by Binh Duong province.
The southern region only accounts for 10 of the 75 largest
projects.

06
Vietnam Electronics export
Vietnam ranks #2 globally in mobile phone exports
VIETNAM ELECTRONICS EXPORT VALUE BY CATEGORIES

US$ billion

$45
s40
$35
$30 CAGR of total export value 36%
$25
$20
$15
$10
$05
$0
2008 2009 2010 2011 2012 2013 2014 2015 2016

Final Subassemblies Components

Source: World Bank WITS, Tractus

Vietnam electronics exporters:

Global Lead Firms - Firms that
coordinate GVC and retain most of
the added value and profits. There
are several MNCs present in various
market segments and their brands are
globally recognized. Key Players in the
Vietnam industry include Samsung,
LG, Canon, Panasonic.
Contract Manufacturers - Companies
in Vietnam are focused on
manufacturing for a range of lead
firms around the world. Key players
in Vietnam include Foxconn, Compal,
Jabil Circuit.
Platform leaders - Companies with
leading technologies (software,
hardware or both) widely used by other
companies. The main player in
Vietnam is Intel

07
SHARE OF VIETNAM ELECTRONIC CATEGORIES EXPORT, 2016
Electronic
Components
12.90% Vietnam hardware exports are concentrated in a few
Industrial narrow product groups. Telephones are the largest export
assemblies product from Vietnam, accounting for 50% of all
0.22% electronics related exports. Though telecom related
products can reach as high as 75% of the total value if
one accounts for components and subassemblies linked to
telephone production. This product group is dominated by
Subassemblies
Samsung which accounts for 98% of the telephone exports.
18.37% Communication
equipment
Other important product groups are computers, storage
Industrial final 50.14%
devices, and consumer electronics. The main companies
products in consumer electronics include LG, Panasonic, Samsung,
0.15% and Canon. Electronic components group is limited and
dominated by Intel. Intel’s export revenue is around $1
Customer billion each year.
Electronics
7.84%
Computer
Equipment
10.38%
Source: World Bank WITS, Tractus

08
Opportunities and challenges
STRENGTH
• Vietnam still has
advantages in labor
availability making it
advantageous for large
operations with thousands
of employees.
• Labor cost share of total
electronic costs is very
low in Vietnam, and are
in fact lower than other
countries in the region.
• Geographic proximity to
global suppliers Ex.
China, Korea, and Japan.
• Stable economic,
business and social
environment.
• Strong international
economic integration
through FTAs with the
main economic regions
make it easier to source
globally and sell globally.
WEAKNESS
• Weak supporting
industry and unclear
development prospects.
• Vietnam is only
participating in the lowest
value-added activities of
the value chain. Upstream
and downstream are off
the table for the moment.
• Electronic production
mainly depends on
imported components
from Korea, ASEAN,
China, Japan and the
localization rate is low.
• Domestic enterprises
only supply low
value-added plastic
components, metal parts,
and packaging.
OPPORTUNITIES
• A strong presence of
global tier1 companies
that are attracting their
suppliers and driving the
development of an
ecosystem.
• Skills and industrial
capabilities are improving
as the government is
promoting the
development of
supporting industries
such as R&D activities.
• Growing demand for
components together with
the lack of local suppliers
offer opportunities for
foreign investors to
produce and sell locally.
• Opportunity to replace
certain activities from
China as a result of Trade
wars.
THREATS
• If Vietnam doesn’t move
up in the value chain,
other countries in the
region will also compete
in costs and labor
availability. Ex Myanmar
• Vietnam electronics
industry is very linked
and dependent on very
few mega companies ex.
Samsung. Should these
companies shift their
focus to other regions
the impact would be very
negative.
09
Key contacts

Antonio Sequeros
Consulting Manager, Vietnam
asequeros@tractus-asia.com

Thuy, Le Ngoc
Bussiness Manager, Vietnam
thuy.le@tractus-asia.com

Authors

Rebecca Giang An
Consulting, Research Analyst
giang.an@tractus-asia.com

http://tractus-asia.com/
© Copyright 2019 Tractus Asia. All rights reserved. This report has been prepared solely for information purposes and does not
necessarily purport to be a complete analysis of the topics discussed, which are inherently unpredictable. It has been based
on sources we believe to be reliable, but we have not independently verified those sources and we do not guarantee that the
information in the report is accurate or complete. Any views expressed in the report reflect our judgment at this date and are
subject to change without notice. Statements that are forward-looking involve known and unknown risks and uncertainties that
may cause future realities to be materially different from those implied by such forward-looking statements. Advice we give to
clients in particular situations may differ from the views expressed in this report. No investment or other business decisions
should be made based solely on the views expressed in this report.

Copyright Tractus Asia Ltd. 2019