Vietnam becomes the world's new supply point

Many global suppliers and manufacturing corporations have been coming to Vietnam to increase orders and production in the supply chain for the world market.

Located in the global supply chain

At the 2023 Cross-Border E-Commerce Conference held on October 19, Mr. Eric Broussard, Vice President of Amazon Group, assessed Vietnam as an emerging supply chain link of global e-commerce. According to him, Vietnam has the opportunity to diversify its product portfolio on e-commerce platforms thanks to its advantage as a new production center (hub) of Asia and the world with rich product supply capacity. In addition, the entrepreneurial spirit in Vietnam is very high, contributing to increasing its role in the global e-commerce supply chain.

According to a new report from Amazon, in the 12 months ending August 31, Vietnamese businesses sold more than 17 million products on this platform, with a value increase of 50% compared to the same period in 2022. There are 5 best-selling product categories including home, kitchen, health - personal care, apparel and beauty. In particular, this is the first year the beauty industry is in the top 5 with products such as eyelashes - fake nails, eyelash serum - hair growth, teeth whitening powder, scar cream "Made in Vietnam" ...

The ability to supply diverse products helps Vietnam become a new supply point of the world.

DO TRUONG

Not only retail, online wholesale opportunities are also promising. Mr. Roger Luo, Director of Alibaba.com Southeast Asia, informed: In the first 6 months of 2023, the total number of transactions of buyers through the platform increased by 33% compared to the same period last year. Although in the context of traditional exports declining, Vietnamese enterprises, mainly small and medium-sized, participating in exports through e-commerce platforms still maintain their operations and even have growth in sales volume. In addition, Vietnam is still leading the world in exporting pepper and cashew nuts; second in exporting coffee and in the top 5 in exporting rice, textiles, footwear, etc.

Having just returned from the world's largest annual international food and beverage fair in 2023 in Germany, Mr. Phan Minh Thong, Chairman and General Director of Phuc Sinh Group, announced that customers are very interested in Vietnamese agricultural products. Pepper, coffee, cinnamon, star anise and many other spices or cashew nuts as well as frozen vegetables, fruits, etc. are very popular. Even Vietnamese coffee this year has no stock to sell as buyers from many places around the world rush to place orders. Some processed agricultural products such as potatoes, cassava, etc. have also been sold everywhere. According to Mr. Thong, for agricultural products that have a large position in the world market, it is necessary to promote deep processing to bring higher value. For example, with pepper, both branches and leaves can be processed into many other products. Or like 1 kg

While the highest priced coffee that Phuc Sinh sells is only 800,000 VND/kg, cascara tea made from coffee husks is sold at double the price. "We have potential and advantages in many industries, especially agricultural products. World customers have known about Vietnamese goods. The important issue is to increase deep processing to bring higher value to farmers and the whole country," Mr. Phan Minh Thong emphasized.

Accounts for more than 10% of semiconductor chips exported to the US

Many technology and electronic products from Vietnam have also affirmed their position in the global market. We are ranked second in exporting mobile phones and components with a value of nearly 58 billion USD, up 0.81% compared to 2021 and accounting for 15.62% of the country's total export turnover of goods. Or the group of electronics, computers and components also exported about 55.5 billion USD, up 9.7%...

According to data from the Ministry of Information and Communications updated to May 2023, Vietnam is holding the third position in Asia in terms of semiconductor chip export sales to the US, after Malaysia and Taiwan. Vietnam is also in the leading group in increasing chip exports to the US, along with Thailand, India and Cambodia. Notably, data from the Ministry of Information and Communications shows that revenue from the US market of the Vietnamese chip industry increased by nearly 75% after 1 year, from 321.7 million USD in February 2022 to 562.5 million USD in February this year, accounting for 11.6% of the market share. This is also the seventh consecutive month that "Made in Vietnam" chips have reached more than 10% of the market share in the US. These figures were collected before the visit of US President Joe Biden to Vietnam, after which there were important cooperations and agreements related to the development of the semiconductor industry; new and expanded projects of foreign investors in this field.

In particular, with the recent expansion of production and new investments by a series of corporations in the technology sector, Vietnam has gradually become a notable name in the global supply chain. For example, there are 25 Apple suppliers with factories in many provinces and cities in Vietnam. These are contractors assembling iPhones, iPads, watches, headphones, and other components. More importantly, a series of Apple suppliers have recently expanded their factories.

For example, last June, Compal Electronics, the contractor manufacturing iPad and Apple Watch, invested in Lien Ha Thai Industrial Park (Thai Binh) to carry out a project specializing in manufacturing, processing, and assembling computers and computer peripherals, communication equipment, household electrical products, and electronic components.

Previously, Compal manufactured Apple products at its factory in Vinh Phuc, while Foxconn, one of Apple’s largest contractors, gradually implemented a plan to relocate iPad and MacBook production to Vietnam. Since the end of 2022, Foxconn has signed a contract to lease a land plot of about 45 hectares in Quang Chau Industrial Park (Bac Giang).

By May 2023, this enterprise will continue to lease a 48-hectare land plot at WHA Industrial Park (Nghe An), with a total investment of 100 million USD in phase 1. According to the latest information from Economic Daily News, Foxconn Industrial Internet (FII), a subsidiary of Foxconn, will exclusively supply servers manufactured in Vietnam to Apple for training and testing AI services. Foxconn is the largest supplier of servers used in Apple's data centers, accounting for about 43% of the global server market... Thus, products from Vietnam are no longer just simple products such as textiles, footwear, but will increasingly include many high-tech products, electronics, and microchips across countries.

World microchip expert, Professor Dang Luong Mo analyzed the small electronic chip that helped Taiwan create economic and political leverage, enhancing the island's position in the world market. There was a time when the global supply chain of the semiconductor industry was heavily dependent on this supplier. However, the global chip map can be redrawn, in which the name Vietnam is mentioned more often. That is a great expectation for the export turnover of this strategic item of Vietnam in the near and far future. Up to now, in addition to the big names in semiconductor chip manufacturing such as Intel, Samsung, Synopsys... that have been present in Vietnam very early, about more than 50 large FDI enterprises in the microelectronics and semiconductor industry, including the field of microchip design, have invested in Vietnam.

Vietnamese goods will increase exponentially…

Dr. Nguyen Quoc Viet, Deputy Director of the Institute for Economic and Policy Research at the School of Economics, Vietnam National University, Hanoi, commented that the trend of shifting production of many large corporations in the world to Vietnam has become clear. This is also an attractive point that Vietnam has maintained over the years. Since then, Vietnam's export goods have also been more diversified, to more markets. The opportunity for Vietnam to participate more deeply in the global supply and production chain after diplomatic partnerships have been raised to a higher level; new generation trade contracts are becoming increasingly clear. However, Vietnamese enterprises also need to be more proactive in grasping new production trends to be proactive in the specialized production chain. From there, they can improve competitiveness and increase the value of domestic goods and Vietnamese brands. For example, Apple's supply chain has many production units in Vietnam, but most of them are still FDI enterprises. Or the core is the chip in Apple products manufactured in other countries and territories and accounts for 2/3 of the product value...

Associate Professor, Dr. Nguyen Thuong Lang (Institute of International Trade and Economics) affirmed that the expectation that Vietnam will become a new supply point for goods in the world market is completely grounded. According to him, Vietnam has a strong force of export production enterprises, with the capacity to organize large-scale industrial production chains with international quality standards that have been established for a long time and are spreading. In particular, with the signing of bilateral and multilateral trade cooperation agreements with most major markets, Vietnam maintains its strength in connecting both input and output goods globally as well as the capacity to supply to large markets. He said that 3 years ago, Vietnam entered the top 20 countries with the largest import-export turnover in the world and ranked similarly in terms of attracting FDI capital. This shows that in the global market, Vietnamese enterprises have grown significantly, with increasingly large-scale production capacity.

For the first time, there is a group of import and export goods reaching 3 digits.

According to the General Department of Customs, in the first 9 months of 2023, the import and export turnover of computers, electronics and components reached 104.23 billion USD. This is also the first import and export group of the country to reach a 3-digit turnover scale. The main export markets of this group of goods include: the US, China, the EU, Hong Kong, etc.

In a market that has been constantly fluctuating over the past 3-4 years, although the amount of goods produced from Vietnam to the world market has decreased, exporting enterprises have quickly regained balance, gradually overcoming difficulties to regain the right to produce and sell from reduced orders. However, in the future, the export of traditional products may narrow or change the quality status with a higher value-added scale. If the semiconductor chip industry is successful, it will promote the Vietnamese economy to transform its economic model from broad to deep for the better. The labor structure will have significant changes, from which the market structure and partners will also shift towards more value, even breaking through with higher value-added.

Associate Professor, Dr. Nguyen Thuong Lang emphasized: The advantage of Vietnamese goods in this period is that major consuming countries such as the US and its allies are having policies to completely reduce dependence on large commodity supply markets from China, Hong Kong, Taiwan, etc. Especially with products that are vital for sustainable development in the 21st century - electronic chips - major countries are gradually finding new sources of supply to avoid dependence. That shift is strategic; Vietnam has been and is considering it a great opportunity to fundamentally replace its position for this new development stage.

In fact, traditional export goods such as textiles and rice from Vietnam can grow sustainably but are unlikely to have a breakthrough, while electronic equipment, semiconductor chips, etc. are expected to be very high. In the new context, Vietnam has known how to create a skillful political position to maintain economic stability, the development from a comprehensive partnership to a comprehensive strategic partnership with the US is a major milestone this year. Reality shows that if we effectively utilize economic cooperation with the US, Japan, South Korea, Singapore, China, etc., Vietnam is completely capable of becoming a global supply center for chips and many other competitive products with fewer obstacles than some countries in the region.

"Some of our calculations show that Vietnam's export turnover can increase 1.5 - 2 times compared to the country's trade growth rate. The reason for our optimistic forecast is the reality of the demand for high-tech goods from countries, especially the US, after the disruption of the supply chain from China due to the Covid-19 defense policy. In addition, the increase in US foreign aid packages will create a higher demand for chip supply, in which Vietnam is one of the suppliers that benefits," he added.

Need to refine deeply, proactively increase competitiveness

Many Vietnamese agricultural products are leading in world exports but most of them are still sold raw. Specific processed products with Vietnamese brands on supermarket shelves or on family dining tables in many international markets are not yet available; or the export of electronic products, phones and components is very large but mainly of FDI enterprises. How to help domestic enterprises promote their internal strength is the most important. There are optimistic factors and expectations to turn Vietnam into an even larger manufacturing factory but there cannot be shortcuts. There needs to be immediate preparation and determination. The government needs to quickly review policies towards improving competitiveness, creating a favorable business environment to promote enterprises towards innovation. Enterprises themselves must focus resources such as effective management, innovation to increase labor productivity... Only then can they meet the conditions to participate more deeply in the supply chain for the world's leading corporations.

(Dr. Nguyen Quoc Viet - Deputy Director of the Institute for Economic and Policy Research, School of Economics, Vietnam National University, Hanoi)

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