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Snapshot: Manufacturing in Vietnam, November 2023

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

November overview

Out of the gates Vietnam’s manufacturing sector started November with some bad news–Samsung Vietnam was estimating it would export just US$57 billion worth of electronics this year, a drop of US$8 billion from 2022. As Vietnam’s biggest single exporter, accounting for around 20 percent of Vietnam’s total exports, this was not good news, although it was to be expected.

Indeed, S&P’s Purchasing Managers Index by November had been trending downward, reaching a five-month low in November of 47.3 this month down from 49.6 in October. This was particularly concerning in that September, October, and November are typically the busiest times of the year in the build up to Christmas in the Western hemisphere.

Furthermore, reports out of Ho Chi Minh City suggested the local garment sector was still on struggle street. One particular company, Garmex Saigon Corporation, reported it had just 37 employees left from 4,000 back in 2019. It cited a lack of orders for the massive downsizing. (Conversely, Vietnam’s Industrial Production Index was up .5 percent).

But garments and textiles were also facing another challenge–buyers were forcing manufacturers to shift to consignment arrangements rather than paying up front. This was putting a huge financial burden on manufacturers according to Ho Chi Minh City’s Department of Industry and Trade.

Furthermore, concerns were raised that the playing field for domestic garment makers compared to their foreign counterparts was uneven. Of note, and worth watching, were suggestions that free trade agreements weren’t working out so well for local firms.

On that last point, it wasn’t just in the garment manufacturing sector that was raising issues with Vietnam’s new found love of free trade. The plastics industry, which reported a 12.2 percent drop year-on-year from January to September, had also suggested that import tariffs on certain plastics products were needed. This was rejected by the Ministry of Finance, but the fact that this was even raised may be indicative of a knowledge gap with regard to Vietnam’s many free trade agreements and how free trade works.

That said, panic didn’t set in until it was reported that Intel had put on ice a planned expansion of its operations in Vietnam. This spurred a flurry of reassurances from the local media that this wasn’t the case, though support for their claim was somewhat thin, mostly hinging on a vaguely worded statement from an Intel representative “Intel is still committed to further expanding its investment in Vietnam”.

All in all, November was largely more of the same. Manufacturing is still facing challenges, although these seem to be mostly confined to domestic firms with foreign firms taking a hit but not nearly as badly. Moving into December, orders are likely to drop off as key export markets break for Christmas. That said, there may be a glimmer of hope in local consumption with the Lunar New Year, slated for early February, likely to spark a flurry of consumer spending in Vietnam.

Key developments, Vietnam manufacturing, November 2023

There were a number of big developments in Vietnam’s manufacturing sector in November. Several big projects started operating and several other sizable projects were announced in both northern and southern Vietnam. These include:

  • The Harting Technology Group opened a new, 2,500 square metre factory in Vietnam’s Hai Duong province. The German company currently manufactures electronic connectors and industrial-grade data cables in Vietnam.
  • Chinese firm Luxshare-ICT is set to expand its operations in Vietnam’s Bac Giang province by $330 million. This will bring its investment in Vietnam to US$504 million. Luxshare-ICT makes cables for various electronic devices.
  • HG Tech, a Chinese manufacturer that specialises in optical devices, lasers, sensors and car parts, is planning a US$50 million factory in northern Vietnam’s Bac Ninh province. The factory is slated to cover five hectares and will supply an increasing number of HG Tech customers in one of Vietnam’s most important manufacturing hubs.
  • Singapore’s Entobel opened its latest project in Vietnam last week, a black soldier fly factory to produce feed for Vietnam’s rapidly growing aquaculture industry.
  • A subsidiary of Japan’s Vsun Solar has inaugurated a US$200 million factory in Phu Tho in northern Vietnam. Covering 13 hectares the project will reportedly employ 700 people when it reaches peak capacity.
  • Radiant Opto-Electronics Corporation from Taiwan has submitted plans to build a US$120 million factory to contribute to its backlight module supply chain in Vietnam’s Nghe An province. The factory is set to cover 8.2 hectares and should be operational by the end of 2024.

Key performance indicators, Vietnam manufacturing, November 2023

Overall, Vietnam’s exports decreased in November over October. They were, however, still 7 percent lower than they were at this time last year. 

Exports

Vietnam’s total exports, November 2023

*FIE = Foreign Invested Enterprise

NovemberYTD
US$Change %US$Change %
Total31,122,215,197-3.5322,608,462,334-5.8
FIE22,263,644,819-4.7234,705,822,537-7.1
FIE % of total71.54134.2972.75122.41

Source: General Department of Customs

Vietnam’s top manufactured exports, November 2023

NovemberYear to date
DescriptionUS$MOM %US$YOY %
Computers, electrical products, spare-parts and components thereof5,106,309,1920.151,640,290,9631.8
Telephones, mobile phones and parts thereof4,362,160,602-16.248,487,712,960-11.7
Machine, equipment, tools and instruments3,872,327,172-13.439,276,243,874-6.5
Textiles and garments2,750,484,6197.230,426,195,407-12.3
Foot-wears1,927,436,19110.518,374,330,758-16.6
Total31,122,215,197-3.5322,608,462,334-5.8
% of total exports57.9058.34

Source: General Department of Customs

S&P Global’s Purchasing Managers’ Index

The S&P Global Vietnam Manufacturing Purchasing Managers’ Index has 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

This is per General Office of Statistics data and despite the manufacturing sector experiencing a broad downturn in response to lower demand for Vietnam’s exports, VN Express is reporting. Conversely, S&P Global’s Purchasing Manager’s Index has found the sector to be in contraction for most of this year. 

The index recorded growth in production in:

  • rubber and plastic products of 9.5 percent,
  • tobacco of 9.1 percent,
  • prefabricated metal products except machinery and equipment of 8.7 percent,
  • metal ore exploitation of 6.3 percent; 
  • food processing and production of 6.1 percent,
  • chemicals and chemical products of 5.9 percent, and 
  • water exploitation, treatment and supply of 5.3 percent.

It also recorded a decrease in production of:

  • other means of transport of 7.3 percent; 
  • motor vehicles of 4.1 percent; 
  • crude oil and natural gas exploitation of 4 percent,
  • other non-metallic minerals of 3.7 percent, and
  • paper and paper products of 2.7 percent.

Vietnam manufacturing outlook for December

With no big changes in terms of the global economic outlook, Vietnam’s manufacturing sector will likely see little change. That said, as the Christmas rush comes to an end, if anything the sector likely won’t see much growth.

That said, the Lunar New Year is around the corner and local manufacturers may find increased demand at home, in lieu of demand abroad.

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