Many companies are chosing to move their production lines out to Vietnam. Whether it is China, Apple, Google or maybe soon even Microsoft, it makes no difference, they all seem to dream about Vietnam. Even smaller companies are doing the same thing, but how come? Is it the low taxes? Political strategies? Whatever the answer, it’s worth the time we are about to give it.
Precautions for the trade war
The reasons why many investors are chosing Vietnam are several. One of them surely is the on-going trade war between China and USA, and yet this is not the only reason. The predictions that producing costs will rise in China are another keay factor, and yet we should not forget the typical business rules. I am talking about “diversifying”.
Many investors are contribuiting to Vietnam’s unprecedented growth compared to other low-cost production countries beacuse they view it as a good close alternative to China. Its geographical proximity to China facilitates the management of the supply chain and other complex operations.
“Here we have reproduced the supply chain model which has determined our success” explains Roberto Leone, Italian entrepreneur co.founder of NiRo Tech, an Italian company specialising in components for mechatronics.
What makes the difference with a mere relocation is the physical presence of NiRo Techin Vietnam, its knowledge of the coutry’s dynamics as well as the relationship with local producers. All these factors of course are some sort of shield for the trade war.
Not the low-cost cliché
Although everybody seems to be keen to believing the classis low-cost card it is better not to take that for granted. It is true that in the forst months of 2019 Vietnam has seen an increase of 81% compared to 2018. Yet this massive growth can’t make us jump to fats conclusions. So let’s start to dispel some myths, Vietnam is chosen for its industrial fabric which is moving to high-level production. There is a solid market of hi-tehc companies from Japan or South Korea which of course have high quality standards.
This would make sense as the manufacturing costs in Vietnam are not much lower than China’s, so why bother? Like we said already, the reason is a mix of elements. Diversifying, trade war paranoia, high-level production are just a few.
Meanwhile we should not forget of big companies participating in the Vietnam party. Both Google and Microsoft are trying to move their factories in Vietnam, or at least out of China. Google has started the production of its new phone, Pixel 4A, in Vietnam in April this year. Pixel 4A is of great significance since it is the sixth best seller in the American market.
Or moving on to Microsoft, for example, has taken its first steps towards the Vietnam production of the new Surface line, a range of laptops and desk computers in the second quarter of this year.
So, are we really seeing the rise of a new global manufacturer? I guess we just need to wait to find out.