Vietnam attracts the PCB makers
31 March 2008
Stories of unabated investment and the rapid growth and expansion of China’s burgeoning electronics industry are commonplace. However, recent developments suggest China is not getting everything its own way for a change. Stricter environmental laws, a new tax scheme, rising land costs and new labour laws in China are increasing pressure on PCB makers' production activity and are also significantly influencing their expansion plans.
Vietnam has emerged as a preferred electronics destination for global companies, with more and more electronics producers relocating to Vietnam from the US, Taiwan, Japan and South Korea. Set against the rapid growth in recent years of the China electronics industry, can Vietnam learn any lessons from its economic powerhouse neighbour?
"In recent years, Vietnam’s electronics sector has seen year-on-year growth of 10-12%. The sector is expected to expand further by 2010 to achieve revenue of US$6 billion from digital technology, mobile phones, cameras and laptops," according to Tran Quang Hung, secretary general of the Vietnam Electronics Enterprises Association.
Vietnam’s growth rate recently has exceeded that of Thailand, Malaysia, Taiwan, South Korea, and even India. Its GDP growth has exceeded 7% in each of the past four years and the government is estimating growth of 8.5% this year.
The Taiwan Printed Circuit Association (TPCA) has recently announced plans to set-up a special zone near Hanoi to accommodate a cluster of Taiwan-based PCB makers, as many of them are considering moving their production from China.
HannStar Board, Gold Circuit Electronics (GCE), Unimicron Technology, Tripod Technology, and Compeq Manufacturing have all reportedly sent representatives to Vietnam to study the possibility of moving their production there from China. Currently, only two Taiwan-based pcb makers, Uniflex Technology and Sunching Electronics, run production in Vietnam.
Other significant investments include Intel raising its investment capital in Vietnam to US$1 billion following Vietnam’s entry to the WTO in 2007. Japan’s Nidec and Meikom have also made multi-billion dollar investments: Nidec established a workshop in the southern province of Binh Duong, while Meikom has invested in an electronics project in Ha Tay Province in the north. Taiwan’s computer, communications and consumer parts giant Foxconn has invested a total of US$5 billion, including a US$1 billion project to produce electronics accessories.
In what appears to be a case of the electronics industry going (perhaps not quite) full circle, or at least an illustration of how quickly the industry has grown in Asia and China in particular, even China’s Ministry of Information Industry was reported last year to be studying the feasibility of having Chinese electronics companies set-up industrial parks in Vietnam.
Vietnam is offering big incentives to investors in the electronics sector. Foreign investors are being attracted by the country’s big land fund with a lot of property suitable for electronics production, cheap labour pool and tax incentives. Sound familiar?
Most electronics ventures in Vietnam produce electronics accessories, with foreign investors currently only using Vietnamese land and labourers, but they do not use local materials. In 2007, Vietnam’s electronics exports brought $2.2 billion in turnover, but the added value of the projects accounted for just 5-10%.
Tran Quang Hung continues: ”Vietnam welcomes all electronics production projects. However, it is not enough to only make electronics accessories. To have a powerful electronics industry, Vietnam also needs good designers, a current shortcoming. Foreign invested electronics investors do not pay attention to training Vietnamese electronics designers. They only focus on training workers for production lines and technical workers for product maintenance. Meanwhile, Vietnam’s universities are also not training designers for the electronics industry. If Vietnam does develop and educate designers, it will never be able to make products of its own.”
It appears that Vietnam has a bright future as an electronics production base and is understandably keen to move up the value chain, in much the same way that China is looking at enhancing its existing capabilities from high-volume manufacturing towards upstream design activity and expertise. This will inevitably happen, no doubt faster than has been experienced in China. As ever though, one thing’s for sure: the one constant in the dynamic PCB industry is change.
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