Vietnam’s Manufacturing Capabilities and Export Performance Make it an Important Sourcing Hub in Global Value Chains

Date: 12 March 2021

Vietnam’s strong export performance in 2020, amid a global decline, makes it one of the most competitive supply bases globally. Increased development in high value-added goods manufacturing, with a growth in capital and consumer goods being exported, make this a key market to monitor for global sourcing managers.

Trends: Most of Vietnam’s top export partners are its neighbours in Asia, although the US continues to be its top export destination. Exports in machinery & electronics dominate, making up 42% of total exports in 2019 and indicating a shift to more value-added manufacturing.

  • Vietnam’s exports reached USD 265bn in 2019 and is officially estimated to have increased to USD 283bn in 2020
  • Exports grew at a CAGR of 17% from 2001-2019, well above global growth of 6%
  • Since 2012, it has achieved a trade surplus, except in 2015 when local businesses imported heavily to fulfil orders
  • Exports in machinery & electronics grew at a CAGR of 28% for the period of 2001-2019, and comprised 42% of total exports in 2019
  • Most of Vietnam’s exports are still low-end manufacturing, but value-added products are on the rise as it capitalises on China’s pivot towards high-tech manufacturing and rising input costs
  • Capital and consumer goods make up the majority of its exports, with the exports of mobile phones, textiles and furniture accounting for the largest share of all exported goods
  • Despite the industrial slowdown experienced globally in 2020, Vietnam’s exports are estimated to have increased by 6.8% year-on-year

Upshot: Strong domestic policies ensured Vietnam experienced limited impact from the pandemic and became one of the few countries to see growth in 2020. In addition, Vietnam signed Free Trade Agreements (FTAs) with the EU, the UK and 14 more countries through the Regional Comprehensive Economic Partnership (RCEP) in 2020.

  • Vietnam’s resilience and manufacturing strength have made it a reliable sourcing base for businesses that no longer want to overexpose themselves to a single source market, but want to expand their supplier base
  • High foreign investment over the past few years has helped uplift its manufacturing and technological capacity
  • The trade war between US and China as well as rising manufacturing costs in China have also benefitted Vietnam and its position in global trade
  • With the signing of the RCEP and the EU-Vietnam FTA in 2020, Vietnam may further challenge India, a top exporter of textiles and chemicals, and China, a top exporter of electronics

Imperatives: While most countries underwent a recession in 2020, Vietnam’s economy expanded and is predicted to grow around 7% in 2021. While its export demand will depend on the health of the global economy as aftereffects of the pandemic endure, it has proven its resilience.

  • Take note of Vietnam. It is now a highly competitive supply base with fast developing, integrated supply chain infrastructure, making it an increasingly indispensable node in global supply chains
  • Incorporate Vietnam into supply base diversification considerations. Adopt a long-term view here – some challenges and imperfections are a short-term reality
  • Understand Vietnam’s capacity to satisfy your procurement needs and seriously consider the role Vietnam could play in your inbound supply chain – how do incumbent source markets compare?
  • Seek out capable, Asia-savvy partners to develop a Vietnam-inclusive procurement strategy


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