Vietnam’s Growing Tech Capabilities Attract Foreign Investment
HCMC – While Vietnam may be more well-known for its sizeable garment manufacturing capabilities, investors may be surprised to learn of the country’s growing technical expertise. High tech companies are starting to flow into the country as they seek to take advantage of the low-cost, young, fast learning, and rapidly expanding workforce.
In particular, many high tech companies are looking to escape worsening business conditions in places like China. These companies have begun moving their operations from the Asian giant due to such issues as rising wages and geopolitical tensions. Additionally, there is the perceived feeling that the country’s government is favoring local tech companies too much through its policies.
Making Vietnam even more attractive to foreign investors, the country’s government is providing a range of financial incentives to businesses engaged in high-tech activities, these include tax holidays and significant reductions in Corporate Income Tax. Please contact a professional advisor to learn more about how your company can take advantage of these incentives.
The country is seeking to transform its workers into a high-tech savvy workforce capable of attracting the world’s biggest tech companies. During January, the United States’ Science Envoy, Dr. Geraldine Richmond, will be visiting Vietnam. According to the US Department of State, Richmond will meet with representatives from the scientific, academic, and business communities in order to discuss ways to build and strengthen research collaboration networks between scientists and engineers in the United States and Vietnam.
Global brands flock to Vietnam
With the country’s generous financial incentives and increasingly educated and expanding workforce, a large number of high-tech companies have moved sizable portions of their operations to Vietnam, these include Samsung, Intel, LG Electronics, and Nokia.
Samsung’s investment into the country has been massive; the company is now Vietnam’s largest exporter as a result of its decision to manufacture the vast majority of its smartphones in the country. By 2017, according to Vietnam’s Ministry of Planning and Investment, Samsung’s total investment into the country will reach US$20 billion. The company has so far invested a total registered capital of US$12.6 billion, making it the country’s largest foreign investor.
Significantly, Samsung, along with similar companies, is working with the government in order to help build up domestic support industries. This will be of major benefit to foreign companies since they will no longer need to import all of their materials and components from abroad.
Nokia is expanding its manufacturing operations in Vietnam even as it is cutting 12,500 factory and professional jobs in China in 2015. The company will now handle most of its phone production in Vietnam’s capital city, Hanoi.
On July 29 of last year, Intel announced that it had produced the first made-in-Vietnam CPU. Intel expects to manufacture 80 percent of its CPUs for the world market in Vietnam.
Vietnam is eager to avoid getting pigeonholed simply as a low-tech assembly line – the government wants the country to move quickly up the value chain and help grow local businesses. According to Vu Tien Loc, chair of the Vietnam Chamber of Commerce and Industry (VCCI), “In 2013, Vietnam exported US$32.2 billion worth of electronic products, but the money was pocketed by FIEs, not Vietnamese owned.” In the long-run, there is the added danger of the country falling into the so-called middle income trap, a scenario that Vietnam’s government is determined to avoid.
Phone is ringing
Vietnam is steadily building its technical expertise. While Samsung remains the obvious behemoth in the phone manufacturing industry in Vietnam, a number of local firms have built their own smartphones for sale on the international market. In 2013, the country’s first domestically produced smartphone, the Vivas Lotus S1, was launched by the Vietnam Post and Telecommunications Group. The Group has also produced a number of low cost versions of the same phone. Additionally, Viettel, the government owned telecommunications company, has being producing smartphones since 2013.
Recently, Bkav, Vietnam’s top internet security firm, unveiled its first-ever Android phone at the Consumer and Electronics Show 2015, which was held in Las Vegas, USA. The phone will be officially released at the Mobile World Congress 2015, which will be held this March in Spain. Bkav’s local factories cover the whole supply chain of the phones from design to packaging.
Interestingly, Bkav was the first smartphone producer in Southeast Asia to obtain usage rights to Qualcom’s latest processor. The company plans to roll out new versions of its phones every six months or so. In an endorsement of Vietnam’s growing technical expertise, Vu Thanh Thang, vice chairman of the company, has stated that “Bkav’s smartphone will put to rest questions about Vietnam’s ability to create hi-tech products.”
Locally produced smartphones in Vietnam tend to be on the lower end of the price spectrum.
Work to be done
Vietnam’s tech industry still remains very much a work in progress. Such necessities as reliable internet connections are still lacking. In fact, in what is becoming a familiar scenario, one of the country’s four inter-continental internet cable systems has been ruptured, resulting in significant slow-downs and quality issues online. It has been rumored that sharks may be attracted to the undersea cables and are attacking them.
Vietnam’s government seems resolute in its determination to continue upgrading its infrastructure and creating better business conditions for foreign businesses, particularly high tech companies. The country realizes that it is in an intense competition with neighboring nations, who are all bidding to become the tech hub of Southeast Asia. Only time will tell if Vietnam will be this region’s new Silicon Valley, but in the meantime, foreign businesses can take advantage of the country’s low-cost labor and financial incentives.
Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email email@example.com or visit www.dezshira.com.
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