Will Vietnam's manufacturing sector continue to boom?

The manufacturing sector is the backbone of Vietnam's economy and the main driver of growth. In 2022, the manufacturing sector contributed 24.8% of Vietnam's GDP. Notably, Vietnam aims for the manufacturing sector to contribute 30% to GDP by 2030, with 45% of manufactured goods being high-tech products.

Sản xuất thiết bị điện tử tại doanh nghiệp trong khu công nghiệp ở Bắc Giang.

Electronic equipment manufacturing at an enterprise in an industrial park in Bac Giang.

Vietnam is attracting advanced semiconductor and electronics technology corporations to set up manufacturing plants in the country. In October 2023, Amkor Group, a chip packaging group, announced its first factory worth 1.6 billion USD in Vietnam.

According to JPMorgan, by 2025, Vietnam will produce 65% of Apple's AirPods headphones, 5% of MacBook laptops, and 20% of iPad tablets along with Apple Watch smartwatches.

In addition to technology manufacturing, Vietnam is also a hub for auto parts manufacturing. South Korea’s Hanwha Group has established a motorcycle parts factory in Hanoi, while Japan’s Yokowo Manufacturing Group has opened a factory in Ha Nam. Vietnam is also attracting massive investment in electric vehicle manufacturing projects.

In another field, Nike, which produces footwear, apparel and equipment in Vietnam, currently has 155 factories in Vietnam, mainly in Ho Chi Minh City and surrounding areas.

Vietnam's solar power capacity has increased 200 times, from 85 MW in 2017 to nearly 17,000 MW in 2021.

However, despite its high growth rate, Vietnam’s manufacturing sector also faces a number of challenges, including a shortage of skilled labor. Most foreign investment is going into high-tech industries, but a lack of skilled labor will be a factor hindering its move up the value chain.

Vietnam also lacks the infrastructure needed to support high-end manufacturing plants. Rail and road infrastructure still need to be improved rapidly to facilitate the movement of raw materials and components between manufacturing facilities.

McKinsey's analysis report recommends that to overcome current challenges, Vietnam needs to urgently transform its role as a low-cost manufacturing location into a high-productivity manufacturing center.

“This requires the public and private sectors to work together. There are ongoing support policies at the government level, but these efforts need to be implemented effectively at both the provincial and industrial levels through streamlined processes,” the McKinsey report said.

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