(Yicai Global) May 15 -- Many Chinese manufacturing firms, from labor-intensive textile companies to high-tech communications and photovoltaic firms, are building factories in Vietnam, to avoid risks and get around trade barriers, and some can already supply all their international orders from their Vietnamese plants.

Gongjin Electronics has spent almost CNY400 million (USD57.5 million) on building the first two phases of its factory in Vietnam, the broadband terminal equipment provider told Yicai Global.

Before the Shenzhen-based company moved into Vietnam, Gongjin didn't have any factories overseas and half of its products were exported to the US or Europe at the time. Just four years later, Gongjin's Vietnamese base makes all its foreign orders.

“Our overseas clients started to worry about the supply chain after China-US trade frictions broke out in 2018 and they suggested that we set up a factory abroad,” Board Secretary He Yimeng said. "As the first phase of the Vietnamese plant yielded good results, we started on the second phase soon after," he added.

And once the third phase is in operation, the Vietnamese plant should have an annual output value of CNY10 billion (USD1.4 billion). "This will allow us to accept more overseas orders," He said.

"DBG Technology, an electronics manufacturing services provider, is preparing to turn its Vietnamese unit into an overseas hub capable of making 40 million smartphones and other types of electronics a year within three years with an annual export value of USD4.5 billion," said Tang Jianxing, chairman of the Huizhou, southern Guangdong province-based company.

DBG's plans to hire and train about 15,000 people in the Southeast Asian country and establish an 'omni-industrial chain supporting local procurement' in Thai Nguyen province, part of the Red River Delta where many Chinese firms are based. The Mekong River Delta is another popular location.

Joining Forces

Many Chinese companies in the upstream and downstream of industrial chains are linking arms to invest in Vietnam. For example, DBG is teaming up with smart hardware maker Huaqin Technology and Apple supplier Lingyi iTech to build an industrial park in Thai Nguyen province.

"Developing overseas in partnership with other market players is a safer option, both from the perspective of partners and clients," said Wang Zhigang, Huaqin's board secretary.

"Shanghai-based Huaqin is strong in business development and design, while DBG is good at smart manufacturing." Wang said. "The partnership in Vietnam not only allows the two parties to share the risks but also helps their businesses bond," he added.

Huaqin, which counts smartphone giants such as Samsung, OPPO and Xiaomi among its clients, mostly uses its plants in Vietnam and Indonesia to fulfil its North American orders while its factory in India supplies the local market and its Chinese facilities cater to other markets, Wang said.

"In the long run, we hope our two manufacturing bases in China will make up 80 percent of total capacity, with the rest being contributed by overseas plants," he added.

Pros and Cons

However, the firm’s Vietnam factory still needs to import many components from China. "Each smartphone has between 1,500 and 1,600 parts and no country can equal China in terms of the completeness of the industrial chain," Wang said.

Labor costs are a notable advantage in Vietnam, but there is not much difference in the cost of water, electricity and other utilities, He said. The Vietnamese government is also providing companies such as Huaqin and Gongjin with various forms of tax relief.

Editors: Tang Shihua, Kim Taylor