Vietnam has gradually emerged as one of Asia’s key manufacturing hubs, now hosting some of the world’s largest foreign investors. Companies like Samsung, LG, Intel, Toyota, and Sumitomo Electric have established a strong presence, turning Vietnam into an export-oriented manufacturing powerhouse. In 2022, the country exported over $399 billion USD, ranking 19th globally. This is a remarkable increase from 2010, when exports were just $72 billion. But what impact does being a manufacturing hub have on Vietnam’s economy, and how did it get here? Let’s start from the beginning.
The growth of Vietnam’s manufacturing sector began with the Doi Moi reforms in 1986, which transformed the country from a centrally planned economy to a market-oriented one. These reforms helped Vietnam recover from its post-war economic crisis by reducing subsidies, promoting exports, and allowing industries more autonomy. This laid the foundation for economic growth and stability.
From the mid-1980s, Vietnam embraced a strategy of industrialization and modernization, which spurred growth in industries like electronics, textiles, and food processing. The country experienced a surge in foreign direct investment (FDI) in the 1990s, which fueled the rise of sectors like electronics and footwear. Vietnam attracted multinational companies by offering favorable policies, incentives, and creating industrial zones to support manufacturing.
One key sector driving Vietnam’s rise is electronics. During the 1990s, companies looking for lower manufacturing costs relocated to Vietnam, with its low labor costs and friendly investment environment. Japanese electronics firms were among the first, with Sony establishing a factory near Ho Chi Minh City in 1994. This marked the start of Vietnam’s growing electronics industry.
Today, Vietnam’s electronics sector is concentrated in the northern provinces like Bac Ninh, Thai Nguyen, and Hai Phong, and southern areas like Ho Chi Minh City (HCMC) and Binh Duong. The northern region, dominated by companies like Samsung and LG, focuses on mobile phones and parts, while the south produces electrical products. Foreign-invested enterprises (FIEs) dominate the sector, with Samsung alone accounting for 27.6% of Vietnam’s exports in 2018.
Samsung’s investment has been transformative, creating thousands of jobs and drawing in suppliers. Similarly, Intel’s $1 billion plant in Ho Chi Minh City’s Saigon Hi-Tech Park has solidified Vietnam’s place in the global electronics supply chain. LG’s investments in Hai Phong, focusing on home appliances and automotive components, have also helped diversify Vietnam’s electronics production.
Vietnam’s membership in the World Trade Organization (WTO) in 2007 further boosted its integration into global value chains, giving manufacturers access to international markets and a stronger legal framework for trade and investment. This led to a more competitive and attractive manufacturing environment.
In addition to electronics, Vietnam’s textile and garment industry, led by companies like Nike and Adidas, became a major contributor to export revenues. The sector employed millions, especially women, and was supported by low labor costs and efficient supply chains. By the early 2000s, Vietnam had become a global leader in garment exports.
Vietnam’s automotive industry also grew, with companies like Toyota, Honda, Ford, and Kia establishing operations in the country. This fueled the rise of local suppliers and made Vietnam one of Southeast Asia’s top automobile manufacturers. The domestic car company VinFast, inaugurated in 2019, further boosted the industry.
Today, Vietnam’s manufacturing sector is a major player in the global market. In 2020, manufacturing attracted 58.2% of the country’s foreign direct investment and contributed 25.1% to Vietnam’s GDP in 2021. Key industries like apparel, textiles, and footwear, dominated by brands like Nike and Adidas, continue to thrive, while the electronics industry, driven by companies like Samsung, reached $96.9 billion in exports in 2019.
What can other developing countries learn from Vietnam’s success? According to Brookings, six key lessons can be drawn. First, trade liberalization is crucial, as seen in Vietnam’s 16 bilateral and multilateral trade agreements. Second, investing in education and skills development, as Vietnam has done, creates a capable workforce for advanced industries. Third, improving the business climate by reducing bureaucracy and taxes attracts more investors.
Fourth, investing in infrastructure, particularly power and transport, has been essential for Vietnam’s manufacturing growth. Fifth, leveraging a low-cost labor force while moving up the value chain ensures sustainable development. Vietnam has transitioned into high-tech industries, a lesson other countries can adopt to diversify and add value to their manufacturing sectors.