Vietnam and its Expanding Supply Chain

by Carolyn Mathas

Vietnam is gaining in the supply chain realm as business moves away from China. Deep C, a Belgian developer that runs five zones in Vietnam, is getting ready. The accelerating shift to countries like Vietnam is part of a growing “China plus one” strategy, with many companies supplementing production in China with expansion to other countries. Deep C explains that for those addressing the Chinese market, they’ll stay in China, but for overseas clients, they want a new location.

Given its bureaucratic and physical infrastructure, including the electricity grid, Vietnam is straining under the weight of demand. Apple produces millions of AirPods there. The complaints about a move to Vietnam include the need to ease bureaucracy, create a more transparent regulatory framework and eliminate “absurd” red tape. ”

Ho Duc Phoc, Vietnam’s finance minister, said that the country has an abundant and cheap labor supply—but is the supply sufficient? And is there enough highly skilled labor? Some companies are building dormitories for workers. Most potential workers are outside the city limits.

Companies already in Vietnam said expansion is still difficult. As Vietnam develops, it remains highly dependent on ties to China’s crucible of manufacturing around the Pearl River delta, which — marketing material from Deep C is just 12 trucking hours away. That proximity allows for the easy transfer of materials but leaves Vietnam’s supply chain more vulnerable.

Samsung, which has six factories in Vietnam and a research and development center, is the biggest foreign investor. Since 2015, it worked with approximately 400 Vietnamese companies to help them improve product quality. The concept of “China plus one” growth won’t end soon.

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