Southeast Asia's Economies
Vietnam's Factory Boom
How Vietnam became one of the world's fastest-growing manufacturing exporters, led by electronics giants like Samsung, and the risks of relying on foreign firms.
Since its Doi Moi reforms in 1986, Vietnam has transformed from one of the world’s poorest countries into a manufacturing powerhouse. In the 2010s and 2020s, its export growth was among the fastest in the world.
Samsung’s bet
In 2008, Samsung opened a major phone factory in northern Vietnam. It expanded rapidly, and Samsung became Vietnam’s largest foreign investor. For years, Samsung’s factories produced a large share of the company’s smartphones and accounted for a big share of Vietnam’s total exports.
Other electronics firms followed, including Apple’s suppliers, Intel, LG and Foxconn.
Why Vietnam
- Low wages and a young, disciplined workforce.
- Political stability under one-party rule.
- Proximity to China and its supply chains.
- Trade agreements: Vietnam signed deals with the EU, Japan, Korea and the Trans-Pacific Partnership countries, giving its exports low-tariff access.
- China+1: companies sought alternatives to China during trade tensions.
Results
- Exports grew to more than the size of GDP.
- Millions moved from farms to factories.
- Poverty fell dramatically.
Challenges
- Low domestic value added: many components are imported, and Vietnamese firms supply relatively few parts.
- Dependence on foreign firms: most exports come from foreign-owned companies.
- Power shortages, such as in 2023, disrupted factories.
- US trade scrutiny: Vietnam’s large trade surplus with the US and concerns about Chinese goods routed through Vietnam led to tariffs in 2025.
- Rising wages may erode cost advantages.
Lessons for India
Vietnam’s success shows the value of trade agreements, openness to investment and focus on labour-intensive manufacturing. India competes with Vietnam for the same China+1 investments.
A village near Hanoi was once mostly rice fields. After an electronics plant opened nearby, young people took factory jobs, new boarding houses and shops sprang up, and family incomes rose several times over within a decade.
Much of Vietnam's export value comes from foreign firms assembling imported components. Building local suppliers is a key challenge.
- Vietnam became a manufacturing powerhouse after Doi Moi.
- Samsung's investment from 2008 made electronics Vietnam's top export.
- Low wages, stability, trade deals and China+1 attracted investors.
- Low local value added and dependence on foreign firms are risks.
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