30 kilometres east of Hanoi, Bắc Ninh is Vietnam’s smallest province, yet boasts the highest population density among any other province. Starting this summer, it is also home to a repurposed Nokia factory that Google is taking over to manufacture its Pixel phones.
In the face of unresolved US-China trade tensions and retaliatory slapping of tariffs, Google’s recent announcement echoes a similar stance held by other global companies on the urgent need to diversify their supply chain for US-bound goods.
Ever since the introduction of punitive tariffs on Chinese goods, Vietnam has witnessed a quarterly hike in y-o-y exports to the US of up to $1.1 Billion. In fact, the US became the largest importer of goods from Vietnam after exports increased 28.8% y-o-y in Q1 this year.
Google’s move mirrors a recent trend among other established players in the consumer electronics industry to relocate some part of their global supply chain from China to Vietnam.
In anticipation of the 10% duty to hit its multi-function printers starting September 1st, Kyocera announced early-August that it will be manufacturing its copiers and all-in-one printers in Vietnam.
Sharp too, has revealed plans to finish building a new factory near Ho Chi Minh by 2020, where it will manufacture car LCD screens and personal computers bound for the US.
Even Foxconn, the world’s largest contract manufacturer for electronics, is currently exploring the feasibility of setting up shop in Vietnam. A $40 Million TV screen production plant is in the works in Northern Vietnam if the plan goes through, with the potential hiring of up to 3,000 workers.
Earlier this year, Lenovo was courted by Bắc Ninh Provincial People’s Committee chairman with preferential policies and worker housing to remove all possible barriers to building its next factory there. All products will be exported directly to the US.
Manufacturers pivoting their base from China to Vietnam are unlikely however to be spared the teething problems of a rapidly developing economy.
Challenges in infrastructure and manpower remain hurdles in Vietnam’s emergence as a global manufacturing powerhouse. Its roads, rail, and ports are plagued daily with congestion and bottlenecks.
Meanwhile, there is but a limited pool of migrant labour in Vietnam as compared to China, where easy accessibility and affordability of labour once underwrote its explosive growth.
Luckily enough for Google, Bắc Ninh is also where Samsung once set up shop almost a decade ago. Having the ability to hire relevant and experienced talent in this Northern Province of Vietnam will prove crucial to Google’s ability to export between 8 to 10 million smartphones this year, double from last year.