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Snapshot: Manufacturing in Vietnam, December 2023

Each month the-shiv provides a snapshot of the manufacturing sector in Vietnam covering the latest developments, key performance indicators, and government data.

December overview

There wasn’t much good news for Vietnam’s manufacturing sector in December. Whereas there had been a slight change of fortune early in the fourth quarter, in December S&P Global’s Purchasing Managers Index reported a fall for November, wiping out said small gains. 

Car sales in November were also down. The Vietnam Automotive Manufacturers Association recorded a drop of 15 percent year on year. This followed on from a generally poor year for the automotive sector.

What’s more, concerns were raised that Vietnam’s supporting industries were being infiltrated by Chinese firms shifting their production to Vietnam to get around US tariff barriers. This was worrying local supporting industries, Professor Phan Dang Tuat, Chairman of the Vietnam Supporting Industry Association told VN Express.

 That said, Christmas candle exports were set for a boost in the lead up to Christmas. In fact, it was reported that in 2022, the US had imported upwards of US$1 billion worth, though it’s not clear the same volume/value would be repeated in 2023–exact data is yet to be forthcoming.

But whereas the interest in Christmas candles was seasonal, semiconductors continued to hold the spotlight as they had for much of the year. Of particular note, Digitimes observed that semiconductor supply chains within Vietnam’s borders were often disconnected. Specifically, manufacturing, packaging, and testing were concentrated in the north, with integrated circuit backend and design in the south, and few, if any, supply chains connecting the two. A challenge that could hold Vietnam back from achieving its semiconductor dream.

All of that said, overall, not a lot changed for the manufacturing sector. It is still struggling amid the broader global challenges that have weighed heavily on the local manufacturing sector.. Moving into January, manufacturers for local consumption may receive a Lunar New Year boost but export firms will likely experience a slow month on the back of lower demand in key export markets.

Key developments, Vietnam manufacturing, December 2023

Key performance indicators, Vietnam manufacturing, December 2023

Overall, Vietnam’s exports increased in December over November. For the full year, however, exports finished the year down 4.6 percent.

Exports

Vietnam’s total exports, December 2023

*FIE = Foreign Invested Enterprise

December2023
US$Change %US$Change %
Total 31,465,351,8731.1354,671,299,450 -4.6
FIE22,267,192,1060.0257,205,588,847-6.0
FIE % of total70.7772.52

Source: General Department of Customs

Vietnam’s top manufactured exports, December 2023

DecemberYear to date
DescriptionUS$MOM %US$YOY %
Computers, electrical products, spare-parts and components thereof5685117683.0011.357,336,370,5853.2
Machine, equipment, tools and instruments3,827,419,840-1.243,128,088,773-5.7
Telephones, mobile phones and parts thereof3,709,755,799-1552,379,388,928-9.7
Textiles and garments2,901,354,9945.533,329,144,538-11.4
Footwear1,857,590,007-3.620,237,502,248-15.3
Total17,981,238,323206,410,495,072
Total exports31,465,351,873354,671,299,450
% of total exports57.1558.20

Source: General Department of Customs

S&P Global’s Purchasing Managers’ Index

S&P Global Vietnam Manufacturing Purchasing Managers’ Index hit a five-month low of 47.3 in November down from 49.6 in October. Anything below 50 is considered a contraction. S&P Global’s press release notes that there has been:

  • A scaling back of production,
  • An uptick in cost pressures,
  • Resistance from customers to price increases,
  • Weaker customer demand,
  • A scaling back of purchasing activity,
  • A modest decrease in staffing levels,
  • Reluctance to hold inventories and a decrease in pre-production inventories,
  • An improvement in delivery times,
  • A shortening of lead times, and
  • A dip in business confidence.

Vietnam’s Industrial Production Index

Vietnam recorded 5.8 percent growth in its industrial production index in December over a year earlier. For the year the country recorded growth of just 1.5 percent. The GSO says underperformance is the result of falling global demand.

Performance by sector

  • Manufacturing-processing sector grew by 1.6 percent;
  • Electricity, gas, hot water and air conditioning by 3.5 percent; and 
  • Water supply and waste-wastewater treatment by 5.8 percent. 
  • The mining sector recorded a fall of 3.9 percent.

Performance by sub-sector

  • Plastics and plastic products at record the highest growth with 11.8 percent, followed by
  • Mining of metals at 13.2 percent, 
  • Tobacco at 10.1 percent; 
  • Chemicals and chemical products at 9.5 percent; and 
  • Metal mining at 9.5 percent.
  • The worst performers were electronics, computers and optical products which recorded a drop og 0.6 percent;
  • Wood processing and wooden products -1.5 percent; 
  • Manufacturing of vehicles with engines -2.4 percent;
  • manufacturing of other vehicles -10.7 percent, and 
  • crude oil and natural gas exploitation -5.7 percent.

Vietnam manufacturing outlook for January

Whereas manufacturers producing goods for the domestic market may record a slight uptick in January, foreign firms and contract manufacturers for foreign brands may see production slow. This is inline with the standard peak and then trough associated with the Christmas break.

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