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Vietnam Picks up Steam on the Global Semiconductor Front
(Business and Technology News, 29 Jan 2008 )
By Mayank Jain, Research Analyst, In-Stat
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With a population of 85 million, Vietnam is a good source of low-cost labor as well as an attractive consumer market. With the adoption of the ‘Doi Moi’ policy (meaning reforms) in 1986, Vietnam has undertaken a significant number of initiatives to facilitate economic growth. The reforms have been targeted at reducing governmental intervention in business, opening trade to the outside world, and encouraging foreign and private investment. Moreover, the country has drawn the attention of global investors with its recent entry into the WTO.
Electronics manufacturing firms are increasing their activities in Vietnam to leverage the cost advantage offered by the country through low labor rates and low operating costs. In addition, an increasing number of companies are considering Vietnam as an alternative manufacturing site to China. The Vietnamese Government is also promoting growth in the electronics industry through various tax incentives. Moreover, Vietnam’s entry into the WTO last year is also helping it to become established as a market driven economy.
Despite challenges that need to be addressed such as improving the higher education system, improving the logistics infrastructure, and nurturing supporting industries, Vietnam is emerging as an important electronics manufacturing destination. Though the current EMS/ODM revenues of Vietnam are just a fraction of China and much lower than other countries like Malaysia or Singapore, the country is experiencing very high growth rates.
Recent research from In-Stat shows that:
• Semiconductor consumption in Vietnam is projected to grow at a CAGR of 23.9% during 2007-2012 to reach $1.9 billion by 2012.
• Computing and consumer electronics accounted for 48.8% and 30.5% respectively of total Vietnamese semiconductor consumption in 2007.
• EMS/ODM revenues in Vietnam are expected to grow at a CAGR of 63.1% during 2007-2012 to reach $1.5 billion by 2012.
• OEM revenues in Vietnam will reach $11.5 billion by 2012, growing at a CAGR of 23.5%.
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