Foster Electric to open factory in Vietnam to diversify supply chain

Foster Electric will open new factory in Vietnam to reduce its dependence on China

Foster decided to invest with Hengdian Group DMEGC Magnetics Co., Ltd., a supplier of ferrite magnets in China, and establish a joint venture company in Vietnam to manufacture ferrite magnets for speakers and the like.

The company procures most of the ferrite magnets, which are key parts of speakers, from China. By establishing a joint venture in Vietnam, the company aims to reduce dependency on China and ensure stable procurement.

Hengdian Group DMEGC Magnetics (Vietnam) will have a capital of $5 million. Foster Electric will own a 19.9 per cent stake in the joint venture while Hengdian Group DMEGC Magnetics will hold the remaining 80.1 per cent.

The plant will be established in An Phat 1 High-Tech Industrial Park in the northern province of Hai Duong. The company expects that stable local procurement of ferrite magnets will improve cost competitiveness and quality while reducing supply chain risks.

Foster is among the latest Japanese manufacturers to diversify their production to Vietnam. To minimise the risk of disruptions to the supply chains of important goods in the event of further unanticipated crises, it is necessary for Japanese manufacturers to establish a sustainable and reliable supply system through the diversification of production bases, especially in the Asian region. Among ASEAN countries, Vietnam is a strong candidate as its economy is expected to grow fast once it recovers from the pandemic.

Even before the COVID-19, Vietnam was one of the most popular countries for Japanese investors intending to expand their business overseas as its market size and growth were two enticing factors.

Last year, the Japanese government provided financial subsidy for many Japanese companies to increase production in Southeast Asia in a multi-billion dollar programme to diversify supply chains. Among them, several Japanese companies got subsidies to expand manufacturing in Vietnam.