Many electronics-based OEMs and their supply chains are looking for China alternatives in the current economic and political landscape. Of all the remaining locations possible in Southeast Asia, Vietnam is coming to the forefront as a viable choice for successful export manufacturing. Every day, we see evidence of large OEMs shifting their focus to Vietnam.
For example, VinGroup just announced that they plan to manufacture four smartphones from their new facility (VinSmart) in Haiphong with a capacity to produce 5 million phones a year in Phase 1. VinGroup also announced their plan to build their own brand of automobiles in Vietnam (VinFast). KeyTronic of Spokane Valley, Washington, plans to lease a plant in DaNang in the middle of Vietnam for PCBAs for production in June 2019. Meiko Electronics—one of the biggest PCB shops in the world—has a major plant near Hanoi to support the automotive industry. Vietnam is now a hotbed of plants to manufacture PCBs and PCBAs. The question now is, “Who will be the first base-materials supplier to build a plant in Vietnam to make copper-clad laminates and prepregs?”
There are a number of reasons why copper-clad laminate and prepreg manufacturing in Vietnam makes sense. The first is that Vietnam has a well-educated and motivated workforce. The literacy rate including the ability to do simple arithmetic in Vietnam was 94.5% according to UNESCO in 2015. This is due to an education system that requires children to attend elementary and secondary school, and are continually sorted based on the results of yearly standardized tests. Think of it as a real-life Hogwarts School sorting hat based on scholastic scores. Each year, students are assigned opportunities to attend schools based on their test scores. Children with the highest scores are afforded the best schools to further their advancement.
At the same time, parents push their children into taking extra courses to gain an advantage within the testing system and over other students. The school day typically begins at 7:00 a.m. for most children. The schools are generally within walking distance from their homes, making it possible to go home and have lunch as well as a quick nap. However, once the official school day is over, many children have extra classes in such topics as English, math, and music. Some do not return home until 8:00 or 9:00 p.m. Saturday is a normal school day, and many also have extra classes on Sunday. For this reason, children are primed for success and are not spoiled brats when entering the workforce, unlike the one-child system. Adults born before 1990 remember the hard times in Vietnam and are grateful for the opportunities that come their way.
Of course, the main objective in transplanting manufacturing facilities is to find cheaper places to operate. Vietnam makes every top-10 list of affordable countries in which to retire. From housing to taxes and food, Vietnam shines as a place where your money can go far. For example, the Hilton Hotel in Hanoi and the Rex Hotel in Ho Chi Minh City—both five-star properties—are less than $125 USD per night for two people. A bowl of pho noodle soup at a street vendor is about $2.50. The famous Banh Mi sandwich is $1.65. The public bus costs 30 cents no matter how far you ride it. Cheap taxis including GRAB taxis (and GRAB motorbikes for a single passenger) are everywhere. Of course, there is the normal cadre of “international cuisine” here including McDonald’s, Burger King, Pizza Hut, Dominos, Starbucks, KFC, and the Hard Rock Café.
Hourly wage rates are exceptionally low, but still provide an adequate standard of living for most people in the major cities and suburbs. Saturday is a normal workday in manufacturing facilities. The Vietnam government can provide the economic considerations for locating here, so I do not need to go into that part in detail. But I can assure you that the Vietnam numbers will look attractive if you are currently producing in China, Taiwan, or Singapore.
The culture is also conducive to a stable, productive workforce. The Vietnamese people work hard and seem to be quite happy at doing similar activities daily. They come to work every day and feel that it is their job is important to the overall production scheme. Many of the women are very conservative and have demonstrated to be first-class employees at all levels of an organization. Historically, men have been the traditional wage earner of the family, but in the last 20 years, Vietnamese women have become better equipped and many have founded their own companies. The business style in Vietnam is very direct and frank (think German), which also helps during negotiations.
Vietnam is a destination in Southeast Asia where foreigners feel comfortable. It is one thing to feel safe in a country, and although Vietnam is a communist country—and there is ample evidence of this every day—foreigners are made to feel comfortable. Hanoi, DaNang, and Ho Chi Minh City (among others) are tourist destinations for people all over the world. Therefore, the culture is welcoming to everyone. The cities are modern with all the amenities that westerners and Europeans appreciate. The countryside is beautiful, and the beaches and resorts rival any in the world today.
What are the negatives about Vietnam? One, for example, is you cannot go around town criticizing the government (similar to China). Secondly, the frenetic scooter and motorbike traffic is a little hard to get used to, so crossing the street may be a little intimidating at first. Third, the weather is a lot like Miami or Houston—hot and muggy the year round. In terms of money, it is weird trying to get used to carrying 100,000–500,000 banknotes in your wallet as the exchange rate is about 23,500 Vietnamese dong to one USD. Finally, there are no suppliers of woven fiberglass, copper foil, or epoxy resin here. However, Taiwan is also limited with a lack of these major building blocks for copper-clad laminates, but the CCL suppliers seem to be doing just fine.
The bottom line is that if your company is looking for a cheaper place to manufacturer copper-clad laminates and prepregs and where your transplant employees would be happy, you cannot go wrong in Vietnam.
Douglas J. Sober is the president of Essex Technologies Group.