Vietnam's ‘tech moment': what's next after the FDI boom?

South China Morning Post

13-07-2025

As an emerging and dynamic economy in Southeast Asia,
Vietnam has been rapidly integrating itself into global tech supply chains. While its rise, fuelled by foreign direct investment (FDI), has been remarkable, Vietnam now stands at a pivotal juncture: will it seize this moment to move up the value chain or remain stuck in low-margin assembly?
Since 2018, US tariffs on hundreds of billions of dollars of Chinese goods have pushed multinational companies to relocate their manufacturing operations and diversify their supply chains to avoid tariffs. This is referred to as the 'China plus one' strategy. Vietnam has been one of the top recipients of these relocations, especially in electronics, furniture, garments and machinery.
In electronics manufacturing, Vietnam has emerged as a global hub for assembling products like smartphones, computers and consumer electronics. Foreign investors have poured billions into factories – Samsung alone contributed about US$55 billion in exports in 2023, constituting nearly 50 per cent of Vietnam's electronics exports. Vietnam's electronic goods in 2023 accounted for 31.9 per cent of the country's total export value. The figure rose to 34.3 per cent last year, far surpassing all other sectors.
A container is loaded onto a cargo ship while docked at Hai Phong port. Vietnam's electronic goods in 2024 accounted for 34.3 per cent of the country's total export value. Photo: Reuters
However, challenges remain. Much of the electronics production is still at the lower end of the value chain – primarily assembly, packaging, and testing of components designed elsewhere. For example, Vietnam's nascent semiconductor industry remains focused on assembly and chip packaging. In addition, Vietnam is not the only 'one' in the 'China plus one' strategy; it faces competition from other regional powers, including many of its peers in
Southeast Asia . Its enduring reliance on China for intermediate inputs makes it hard to navigate US trade measures and geopolitical shocks.
From a low base in the 1990s, Vietnam pursued an FDI-led growth model by prioritising light manufacturing and export processing zones. The country's one-party system offers political and policy stability and clear long-term development plans. In contrast, regional peers like Malaysia have seen more flux given the vicissitudes of its domestic politics, and
Indonesia historically has had more red tape for investors.
FDI has been Vietnam's growth engine, but no longer provides a ladder to advanced tech competitiveness. In the 1970s, Malaysia leveraged FDI for genuine industrial upgrading – for example, Penang's semiconductor cluster. By contrast, while today's multinationals fiercely guard high-value intellectual property and production, Vietnam's role remains confined to low-margin assembly, with limited spillover effects.
Vertical integration along the value chain through technology transfer, human labour training and direct support has become less available in the 21st century. Eighty per cent of Vietnam's mobile phone exports and more than 70 per cent of its electronics products, for instance, rely on imported components, leaving local firms as subcontractors, not innovators. Therefore, a breakthrough in Vietnam's position in the global value chain relies less on FDI than on its domestic capacity.