FDI and Manufacturing: The Engine of Modern Vietnam
Vietnam has spent forty years building itself into one of Asia's most attractive low-cost manufacturing destinations. Samsung, Intel, Foxconn, and the China+1 story.
Vietnam has spent forty years deliberately building itself into one of the world's largest low-cost manufacturing destinations. The story has three phases:
Phase 1: After Đổi Mới (1986–2000)
After the 1986 reforms, the country opened to foreign investment with the 1987 Foreign Investment Law. Early entrants — Japanese, then Korean, then Taiwanese — built textile, footwear, and basic electronics assembly. By 2000 Vietnam was a recognised name in low-end consumer goods.
Phase 2: WTO and Samsung (2007–2018)
Joining the World Trade Organisation in 2007 unlocked a wave of larger investments. Samsung's first major Vietnamese factory opened in Bắc Ninh in 2009; today Samsung's Vietnam operations produce roughly half of all Samsung mobile phones globally. The company employs over 100,000 people in two industrial parks (Bắc Ninh and Thái Nguyên) and one R&D centre (Hanoi).
Other large entrants: Intel (HCMC, $1.5B initial), LG (Hải Phòng), Canon, Honda.
Phase 3: China+1 (2018–present)
The US–China trade war from 2018 and the COVID supply-chain shocks of 2020–22 pushed multinationals to look for an alternative to China. Vietnam was the most obvious choice for several reasons:
- Geographic proximity to Chinese supplier networks.
- Land border with China — Hà Khẩu / Lào Cai is a major trade crossing.
- Existing manufacturing base and infrastructure built over the previous two decades.
- Working-age population — large, young, increasingly skilled.
- Free-trade agreements: CPTPP (2018), EU-Vietnam FTA (2020), RCEP (2022).
Apple suppliers (Foxconn, Luxshare, Goertek) have built or expanded substantial Vietnamese operations. AirPods are now made primarily in Vietnam. iPad assembly began in 2022.
What Vietnam manufactures
| Category | Major brands / sub-sectors |
|---|---|
| Smartphones & electronics | Samsung, Apple suppliers, LG, Canon |
| Footwear | Nike, Adidas, Puma — Vietnam is the #2 producer globally |
| Garments | H&M, Uniqlo, Gap, Zara — Vietnam is the #2 garment exporter globally |
| Furniture | IKEA, La-Z-Boy, Ashley — Vietnam is the #1 wooden furniture exporter to the US |
| Bicycles | Most of the world's mid-market bikes |
| Solar panels | Major Chinese brands manufacture in VN for US market |
Where the factories are
- Bắc Ninh & Thái Nguyên (north of Hanoi) — Samsung, electronics.
- Hải Phòng — LG, port-adjacent heavy manufacturing.
- Bình Dương & Đồng Nai (around HCMC) — diversified, the largest single concentration of foreign-owned factories.
- Long An & Tây Ninh — newer industrial zones, often Chinese investment.
- Đà Nẵng & Quảng Nam — central coast, growing manufacturing presence.
The challenges
- Power. Vietnam has had recurring summer blackouts in industrial zones; the grid hasn't kept pace with demand.
- Skilled labour. Plenty of unskilled workers; shortage of engineers and mid-level managers.
- Logistics infrastructure. Ports and rail are improving but congested.
- The supplier base is shallow compared with China; high-spec inputs still imported.
- Land prices in established industrial zones have risen sharply.
What's coming
- Semiconductors — Vietnam is courting fab and packaging investment; LG Innotek, Amkor, and others have committed billions.
- EV manufacturing — VinFast, the domestic player, opened a US factory in North Carolina; foreign EV makers are eyeing Vietnam.
- Higher-value services — Hanoi and HCMC have growing fintech and IT services sectors aimed at export.
The China+1 story isn't over. India and Indonesia are competing for the same investment. Vietnam's near-term advantage holds; the next decade depends on whether it can move up the value chain fast enough.