Vietnam Boosts Export of Value-Added Products

3:54:36 PM | 11/2/2023

The period 2016-2022 witnessed a remarkable surge in the export turnover of electronics and phones, reflecting Vietnam’s enhanced position in the global value chain. Vietnam shifted from exporting agricultural products and raw materials to exporting high value-added products.

The electronics, computers, and components group in Vietnam is a key industry that has attracted considerable foreign direct investment

Strong growth in electronic exports

Electronics, computers, and components are a product group that occupies a significant share of the total export turnover and significantly influences the overall export growth of the country. From 2016 to 2022, the export value of electronic products, phones, and machinery increased by 193%, 68%, and 336%, respectively.

In the first eight months of this year, the export value of electronics, computers, and components reached US$36.2 billion, accounting for 14.9% of the total export turnover. This was the smallest decline among the leading export products. The main export markets for this product group were the EU, the United States, and China.

The electronics industry is a key manufacturing industry in the economy that has a strong spillover effect on other industries. It also reflects the level of economic and technical development of each country in the world. Vietnam’s electronics industry currently contributes 17.8% to the entire industry.

Recognizing this importance, domestic and foreign investors have been increasing their investment in this field. Many major global electronic companies have established production facilities for technological electronic products in Vietnam such as Samsung, LG, Foxconn, Fukang Technology, and LG Display. Recently, Apple announced that it had completed the transfer of 11 audio-visual equipment factories to Vietnam. Google also stated that Vietnam was among the potential markets that the company was considering investing in Southeast Asia in the near future.

Many challenges remain

The electronics, computers, and components group in Vietnam is a key industry that has attracted considerable foreign direct investment. However, Vietnamese enterprises are still at the initial stage of the electronic product production chain and largely dependent on foreign-invested enterprises. The products of Vietnamese enterprises have not focused on deep processing and developing high-tech and smart export products. The proportion of processed and manufactured products with high added value remains low.

According to a recent report, high-tech products such as electronics, computers, and phones mostly belong to foreign-invested enterprises. They account for 61% of the export share, while the remaining 39% comes from private and state-owned enterprises.

The dependence rate of electronics exports on foreign-invested enterprises is expected to increase in the near future as more large enterprises invest in Vietnam. J.P Morgan estimates that by 2025, Apple will transfer 65% of AirPod production, 20% of iPad, 20% of Apple Watch and 5% of MacBook to Vietnam.

By 2025, Intel is also expanding the second phase of its microchip testing factory in Ho Chi Minh City with a huge investment of up to US$4 billion. Other American companies such as Boeing, Google and Walmart have announced plans to expand their supplier networks and manufacturing facilities in Vietnam after studying the market.

To sustain the export activities of electronics, computers, and components in the context of Vietnam’s integration with various free trade agreements, state management agencies and businesses need to collaborate and support each other. Businesses also need investment attention and preferential support for research, product trial production, and trade promotion programs. Legal policies, especially specific regulations on goods originating in Vietnam, should be reviewed and improved; solutions to expand domestic and export markets should be implemented; trade representative agencies and industry associations should play a more active and effective role in trade promotion; business opportunities and market expansion for businesses should be sought; propaganda and guidance documents should be promoted to effectively implement and take advantage of opportunities to expand export markets and attract investment from newly signed free trade agreements.

Moreover, according to the Ministry of Industry and Trade, Vietnam needs to transform its industry structure and improve its quality and innovation in trade promotion processes to adapt to the new situation; increase investment and application of science and technology in export. There should be a long-term development plan, focusing on core, breakthrough products; developments in the world’s main economic and political situations should be closely monitored to take appropriate action and timely response measures; export products and markets should be diversified, taking full advantage of free trade agreements that have taken effect. Training should be fostered to improve the quality of human resources, have a competitive strategy, and increase participation in the global value chain.

By Huong Ly, Vietnam Business Forum