Vietnam aims after China’s IT crown as businesses grow weary of “zero COVID”

• Vietnam is emerging as a major hub for multinational corporations.
• Some argue that it is simply too expensive to be located in China right now.
• The Southeast Asian economy is expected to rise by 7.2 percent this year.

According to Greg Poling, head of the Southeast Asia Program at the Center for Strategic and International Studies (CSIS), “when businesses get weary of ‘zero COVID’ breaking the camel’s back, Vietnam eyes China’s tech crown.”

Although Vietnam is not the only country where multinational corporations are attempting to expand outside of China, it is perhaps the most successful.

Samsung, Apple, and Google are all advancing with firsts in the Southeast Asian nation.

Two of Apple’s most significant suppliers, Foxconn and Luxshare Precision Industry, are now negotiating to produce Apple Watches and Macbooks in Vietnam for the first time. Foxconn, a Taiwan-based company, has announced intentions to invest $300 million in a new 50.5-hectare facility in Bac Giang, a northern province roughly 50 kilometers (31 miles) from Hanoi, as part of its expansion into Vietnam.

Other Apple items are also anticipated to be produced in Vietnam more frequently; according to JP Morgan research published last month, by 2025, 65 percent of the company’s iconic AirPod wireless headphones would be produced there.

In 2023, Google will start producing its Pixel smartphones in Vietnam, while Samsung will start producing semiconductor components at a sizable factory in Thai Nguyen province the following summer.

Albert Tan, an associate professor at the Asian Institute of Management in Manila, the Philippines, told Al Jazeera that it is simply too expensive to be in China right now. “The issue is that lockdowns happen so frequently and in such unanticipated ways… There is a factory exodus to Vietnam.

Tan claimed that with the appropriate policies in place, Vietnam could emerge as Asia’s “next industrial superpower.”

The challenge, he continued, is how quickly Vietnam would be able to absorb all of this manufacturing from China and develop its own capabilities.

Prior to its emergence as a center of tech manufacturing in the late 1980s as a result of the liberal economic reforms known as Doi Moi, Vietnam was among the world’s poorest nations.

Following the widespread distribution of immunizations, Vietnam officially transitioned from “zero-COVID” to living with the virus after tight COVID lockdowns caused the country’s worst economic recession in decades last year. The Southeast Asian economy is expected to rise by 7.2 percent this year, up from 2.6 percent growth last year, according to the World Bank, while China’s GDP is expected to increase by 2.8 percent.

A significant portion of such rise can be attributable to exports, which in the first half of 2022 totaled $186 billion, up more than 17% year over year.

Analysts note that Vietnam’s rising position dates back well before the pandemic, despite the fact that China’s COVID policies have eroded investor trust.

According to David Dapice, an economist at the Vietnam Program at Harvard’s Kennedy School, “Vietnam has been receiving a high amount of foreign direct investment since trade tensions with China flared and China’s industrial labor costs started rising fast nearly 10 years ago.”

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