Getting a lift from tech investment

Apple has been researching the feasibility of expanding iPhone assembly in Vietnam

Since its first investment in Ho Chi Minh City, Intel Products Vietnam Co., Ltd.’s operations have grown into a major driver of the corporation’s global growth.

“At first, the location Intel Products selected to develop the assembly facility was empty, but now it homes a hi-tech park that can meet almost all of the needs in service demand for overseas investors,” Kim Huat Ooi, vice chairman cum general director of Intel Products Vietnam said. “With this growth basis, the group has built an assembly facility and one of the largest testing centres in Ho Chi Minh City.”

Apart from generating employment and tremendous revenues for both the corporation and Vietnam, Intel’s activities have also opened doors for large-scale tech groups to invest in Ho Chi Minh City, such as Samsung.

After 12 years in Vietnam, Samsung Vietnam now makes up a sizeable chunk of the country’s export turnover. To date, the South Korean-backed company is home to 130,000 workers with six factories and one research and development centre across the country. Thanks to its localisation policy, it has cooperated with over 50 local first-tier vendors and hundreds of second-tier vendors.

Elsewhere, multinational group Techtronic Industries (TTI), which is developing a $650 million plant complex in Saigon Hi-Tech Park (SHTP), recently met with more than 100 domestic suppliers to find vendors for its project manufacturing hand-held cordless power tools and outdoor power equipment.

Nate Easter, executive vice president of Global Sourcing and Outdoor Products Operation of TTI, said that the company will provide details of a domestic supplier development plan for the SHTP and a Center of Supporting Industries Development that will help establish Vietnamese supplier links with TTI. “The company will support domestic vendors to receive tech from TTI or its partners when they are selected to join our supply chains,” Easter said.

Meanwhile, the local market took notice of Apple’s plans to shift iPhone production lines to Vietnam as COVID-19 remains serious and US-China tensions continue to boil over. However, not all tech giants will be able to improve Vietnam’s supply chains, especially groups heading to the country to seek assembly partners.

Representatives of Apple visited Luxshare ICT in the northern province of Bac Giang last month to investigate the feasibility of expanding iPhone assembly work there. However, the company has not yet met Apple’s requirements.

According to Nguyen Quyen, director at CEL Consulting Vietnam, Luxshare ICT’s missed opportunity to become an iPhone assembler is not too regrettable because it would not have opened opportunities for Vietnamese suppliers to set foot in Apple’s supply chain.

Luxshare, which has already had a deal to manufacture AirPods, is also targeting assembling but the agreement with Apple would not allow it to select new partners in Vietnam. Apple is also unwilling to change its existing suppliers.

“Vietnamese suppliers could only join in the packaging segment, which brings little added value. It would be similar to Microsoft’s Nokia assembly plant in the northern province of Bac Ninh which also did not improve Vietnam’s capacity in the mobile phone sector,” Quyen said.

Adding to Apple and Microsoft, in 2015, South Korean-based LG selected 4P Co., Ltd. as its local partner to supplement chips and assemble LG items. South Korea’s fourth-largest tech group also plans to relocate some manufacturing lines, mainly assembling, to Vietnam, according to the Ministry of Industry and Trade. Pointedly, the authority of the northern city of Haiphong is proposing to add 687 hectares to Dinh Vu-Cat Hai Economic Zone, aiming to facilitate LG’s expansion.

“If Vietnam manages to lure in large-scale mobile phone assembly projects, foreign suppliers will also come,” Quyen said. “For example, LG Display is currently a second supplier for organic LED screens for iPhones. Once Apple selects Vietnam to assemble iPhones, LG Display could consider developing a screen manufacturing plant here too.”