Popular industries of manufacturing in Vietnam

You are finding opportunities to make investment in Vietnam, aren’t you? Of course, this is good time to consider leasing industrial property in industrial parks in Vietnam for building factories to manufacture products. But what products are exactly manufactured in Vietnam recently? There are several key industries in Vietnam now.

1. Textile and garment industry

Vietnam’s garment and textile industry consist of 3 sub-sectors: upstream sector (fiber production), midstream sector (fabric production and dyeing), and downstream sector (garment manufacturing). Sub-sectors that produce fibers or fabric are mainly used for domestic consumption because of the low quality. Downstream sector of garment manufacturing accounts for around 70 percent of the total apparel and textile sector in Vietnam with Cut-Make-Trim (CMT) models being the main activities.

In 2019, CMT accounted for about 65 percent of total exports, while the more advanced business models, like Original Equipment Manufacturer (OEM) and Original Design Manufacturer (ODM) accounted for only 35 percent. The US, Europe, Japan, and South Korea are the main export destinations of Vietnam’s textile and garments products. Although Vietnam has a huge potential for cotton cultivation and production, the textile industry imports most of the cotton inputs. In 2019, Vietnam imported up to 89 percent of fabrics, of which, 55 percent were from China, 16 percent from South Korea, 12 percent from Taiwan, and 6 percent from Japan.

2. Machinery

According to market-prospects.com, Vietnam is predicted to become a new manufacturing base in Asia, at which the demand for machinery in many industries is expected higher. Despite of Covid-19 pandemic, Vietnam's industrial production index increased by 2.71% compared to the same period last year (2019) (October 2020). Since the second half of 2018, under the influence of the US-China trade war, Vietnam has become a popular investment region in Asia and the world's most compact manufacturing base.

In recent years, the Vietnamese government has actively developed domestic manufacturing, attracting many foreign manufacturing industries such as textiles, shoe-making, 3C electronic products, etc. to invest in Vietnam to set up factories, and its domestic manufacturing processing demand has increased year by year, thus driving the general demand for machine tools. With the investment of foreign capital and the rapid development of Vietnam's local economy, the cognition of automation and smart machinery began to sprout. Taiwan's machinery is flexible and customized, and the introduction of IT application development of smart machinery just meets the needs of Vietnam's local transformation and upgrading. It is expected that after many new generation FTA signed sich as EVFTA, CPTPP, RCEP can boost the manufacturing faster. In this case, investment for machinery fabrication factory in Vietnam should be wonderful option to seize opportunities of market expansion in Vietnam and worldwide.

3. Electric equipment and Electronics

Amid the ongoing US-China trade war and rising manufacturing costs in China, Vietnam has reaped the benefits to further participate in regional and global value chains. Vietnam has climbed the ranks as a key electronics exporter, from a modest 47th place in 2001 to 12th place in 2019. Especially, mobile phone exports were ranked second worldwide, with a value of over US$50 billion in 2019. EI in Vietnam is mainly dominated by foreign companies, particularly multinational companies.

Although the number of foreign-invested enterprises (FIEs) is only one-third of the total EI enterprises, from 2016 to 2019, their export share accounted for over 90 percent of total exports and covered 80 percent of the domestic market demand. As of June 2020, some large FIEs have completed their production plant relocation to Vietnam. Notably, LG’s smartphone production has moved entirely from South Korea to Hai Phong. Apple has moved part of the production of its AirPods, while Nintendo has also transferred a part of its Switch Lite game console to Vietnam.

4. Agricultural manufacturing

With its significant contribution to gross domestic product (20%), agriculture will continue to play a considerable role in Vietnam’s transition to a market-based economy. Vietnam’s strength in agriculture output is built upon a large rural base (66% of the population) where farm and agri-business labour accounts for 70% of the workforce.

Besides production to satisfy (increasing) domestic demand, Vietnam is also playing its part on the agricultural import and export markets. Vietnam is characterised by a certain extent of geographical specialisation with particular crops concentrated in specific parts of the country such as:

• Aquaculture in the Mekong River Delta
• Rice in the Mekong River Delta and Red River Delta
• Coffee in the Central Highlands
• Tea in the Northeast and Northwest
• Rubber in the South
• Fruit in the Mekong River Delta
• Cocoa in the Central Highlands, Mekong Delta
• Spices in the Central Highlands
• Dairy in the Mekong Delta, the Northwest
• Pork in the South
• Vegetables in Lam Dong and the Red River Delta
• Flowers in Lam Dong, the North