Vietnam benefits most from China+1 strategy

Ninelu Tu, Taipei; Willis Ke, DIGITIMES Asia 0

While Southeast Asia is the most popular investment destination for electronics manufacturers seeking to diversify production, Vietnam seems to be the biggest beneficiary of the so-called "China+1" strategy - running production in China and other places at the same time.

Vietnam's exports of electronics products to the US in 2020 shot up 167% from 2018, with such products also commanding over 35% of its total outbound shipments in 2019, according to statistics cited by Karen Ma, a division chief at the Industry, Science and Technology Strategy Center under the Taiwanese government-funded Industrial Technology Research Institute (ITRI).

The same tallies also show that electronics products are also largest export category for Malaysia and the Philippines, with handsets and IC packaging as leading segments.

Ma said electronics manufacturers will have to weigh a variety of factors before diversifying overseas production bases, including overall plant costs such as land, facilities, water and power supply; the availability of human resources and their costs; the integrity of regional infrastructure construction; government tax and trade incentives and policies; upstream and downstream supply chain support; market potentials; and political risks.

Jerry Hsu, president of power supply vendor AcBeL PolyTech, also noted that as supply chain clusters have yet to take shape in Southeast Asia, electronics makers setting up operations there may see their cost effectiveness and production efficiency affected.

With his company having 40 years of manufacturing operations in the Philippines, Hsu stressed that the integrity of the supply chain is a critical part of the industry development and it will take time to transfer the supply chain to a new region, given that it took 20 years for global manufacturers to establish a complete ecosystem in China. He continued that upstream and downstream players should join discussions to work out optimal relocation solutions.