Amid the great-power rivalry and tit-for-tat tariffs between the US and China, numerous companies have shifted their sourcing and manufacturing to nations with lower labor costs, hoping to mitigate the risk of being too dependent on the Chinese market. Many academics refer to this approach as the “China Plus One” strategy, Plus One or C+1.
Vietnam has been the talk of the town. The country has become an attractive supply chain alternative to China, given its geographic proximity to the economic giant, resilient economic growth, cost-effective labor force, growing domestic market, and the government’s consistent efforts to better the workforce education and infrastructure. Vietnam’s comparative advantage is also bolstered by its gradual shift from labor-intensive manufacturing to high-end industries that rely on technical expertise.
A new wave of shifts in global supply chains and China’s patchy economic recovery have prompted Taiwanese businesses to eye Vietnam as a new base for their operations, helping them diversify their revenue streams and reduce manufacturing and supply chain risks. Vietnam has risen to be an ideal stop for Taiwanese companies moving their supply chains to Southeast Asia, Southeast-Asia Impact Alliance founder CY Huang (黃齊元) said.
Taiwan’s investment in Vietnam began in 1988, following the enactment of Vietnam’s Foreign Investment Law in December 1987. In view of the New Southbound Policy, which was launched in 2016 by the administration of former president Tsai Ing-wen (蔡英文), Taiwan has identified Vietnam as a prime investment spot. Over the past 35 years, investment from Taiwan has seen a dramatic change, with the focus moving from labor-intensive sectors like wooden furniture, leather, footwear and textiles to high-growth ones, such as semiconductors, electronics and precision machinery.
A significant fourfold surge in investment capital from 2022 to US$2.2 billion last year suggests that Taiwan sees great potential in the Vietnamese market. Taiwan now ranks fourth among the 145 economies that have invested in Vietnam, with about 3,200 projects and more than US$39.5 billion in registered capital. With four projects totaling US$255 million — 50 percent of the total — the electronics industry takes the lead in terms of investment value. Second place goes to the garment industry with 24 percent, followed by the electrical equipment industry with 11 percent.
Investments from Taiwan are dispersed across more than 50 Vietnamese cities and provinces. Among the municipalities that receive the most remarkable registered investment capital from Taiwan, more than US$11 billion, over US$6 billion and US$5 billion went to Ha Tinh, Binh Duong and Dong Nai respectively. Huge investment from Taiwan can also be observed in Ba Ria-Vung Tau province, Long An province and Ho Chi Minh City.
During the first half of this year, 39 new industrial projects filed by Taiwan amounted to US$513.37 million, or 49 percent of the nation’s total foreign direct investment during that time. The northern part of Vietnam is home to 22 projects, while the south hosts 17 projects. Despite a greater number of new manufacturing projects being drawn to the north, the south has the highest investment value of US$285.4 million.
In recent years, Taiwanese firms have stepped up their investment in manufacturing and digital sectors. Taiwan’s major electronics conglomerates, such as Foxconn, Pegatron, Quanta, Qisda, Compal, Tripod Technology and Wistron, have built strong footholds or are seeking to expand production capability in Vietnam. Taiwan-based manufacturing behemoth Hon Hai Precision Industry Co, also known as Foxconn, has become a pioneer in the manufacturing industry’s relocation trends. Early last month, Foxconn obtained investment certificates for two projects totaling US$551 million in Quang Ninh, Vietnam’s northeastern province. To foster the C+1 strategy, Foxconn went so far as to treble the number of manufacturing projects in Vietnam.
The potential of Taiwanese high-tech companies boosting their investments in Vietnam is promising, and this trend has further expanded due to Vietnam’s recent initiatives to enhance its competitiveness. The government’s efforts to attract high-tech enterprises are demonstrated by Decree 10/2024/ND-CP, which took effect in March, unlocking investment incentives and support measures for infrastructure projects operating in high-tech zones.
Last year, the Vietnamese government launched a national semiconductor industry strategy and launched a plan to “train 50,000 engineers for all stages of the value chain” by 2030. The National Innovation Center is collaborating with enterprises, universities and experts from Taiwan to build chip design training centers, organize training programs, and support educational institutions through software licenses and grants.
At the first-held Vietnam-Taiwan Business Forum in Hanoi in April, Taipei Economic and Cultural Office in Vietnam Representative Richard Shih (石瑞琦) underscored that Vietnam “solidified its position as the most attractive investment destination for Taiwanese companies in Southeast Asia and globally,” adding that Taiwanese electronics manufacturing companies would continue to pick Vietnam as their preferred offshore investment destination for the next three years. A recent survey by Taiwan’s Ministry of Economic Affairs showed that 17.7 percent of Taiwan’s traditional manufacturing companies and 15.04 percent of information and digital technology firms are looking to expand their investments into Vietnam.
Plenty of space exists for joint collaboration. At a time when companies are shifting their production from China to Southeast Asia, Vietnam could benefit from Taiwan’s expertise and resources as a semiconductor powerhouse, allowing it to fulfill its ambition of becoming an Asian chip manufacturing hub. As a major packaging and testing hub, Vietnam has fostered its tech-training of Gen Z students in the hope of increasing the number of semiconductor engineers 10-fold within the next 10 years. Educational institutions and high-tech firms from both sides are well-advised to explore collaborative programs, such as academic exchanges and field trips, to make high-tech collaboration a new thrust in Taiwan-Vietnam ties.
Although lower labor costs and tax incentives have proved crucial for luring Taiwanese investments, a skilled labor force is no less important. Although five Vietnamese universities have launched semiconductor and chip design programs, there would likely be an outflow crisis of skilled talent due to low wages. As cultivating competent engineers in the semiconductor and electronics sectors is crucial, the government should come up with a workable plan to increase wages and offer incentives to retain local talent.
Taiwan could lend a hand by supporting Vietnam with workforce training. The International Industrial Talents Education Special (INTENSE) Program by the Taiwanese Ministry of Education, with a focus on talent cultivation in STEM, finance and semiconductor-related fields, could help Vietnamese students acquire hands-on experience and training courses from Taiwanese institutions. Upon completion of their degree, they will work for companies that supported them for at least two years. After that, they can choose to work in Taiwan or go back to Vietnam. Whatever they decide, junior talent could potentially become a bridge between Taiwan and Vietnam, helping to alleviate the labor shortages in both economies.
In short, Vietnam has become a compelling destination for Taiwanese companies looking to mitigate geopolitical uncertainties. On its part, Taiwan’s investment could help Vietnam catch up with the Fourth Industrial Revolution while adding substance to the country’s aspiration to become an upper-middle-income nation by 2030 and a high-income nation by 2050.
Huynh Tam Sang is a lecturer at Ho Chi Minh City University of Social Sciences and Humanities, Young Leaders Program member of the Pacific Forum, research fellow at the Taiwan NextGen Foundation and visiting scholar at National Taiwan University.
The Chinese Communist Party (CCP) has long been expansionist and contemptuous of international law. Under Chinese President Xi Jinping (習近平), the CCP regime has become more despotic, coercive and punitive. As part of its strategy to annex Taiwan, Beijing has sought to erase the island democracy’s international identity by bribing countries to sever diplomatic ties with Taipei. One by one, China has peeled away Taiwan’s remaining diplomatic partners, leaving just 12 countries (mostly small developing states) and the Vatican recognizing Taiwan as a sovereign nation. Taiwan’s formal international space has shrunk dramatically. Yet even as Beijing has scored diplomatic successes, its overreach
In her article in Foreign Affairs, “A Perfect Storm for Taiwan in 2026?,” Yun Sun (孫韻), director of the China program at the Stimson Center in Washington, said that the US has grown indifferent to Taiwan, contending that, since it has long been the fear of US intervention — and the Chinese People’s Liberation Army’s (PLA) inability to prevail against US forces — that has deterred China from using force against Taiwan, this perceived indifference from the US could lead China to conclude that a window of opportunity for a Taiwan invasion has opened this year. Most notably, she observes that
For Taiwan, the ongoing US and Israeli strikes on Iranian targets are a warning signal: When a major power stretches the boundaries of self-defense, smaller states feel the tremors first. Taiwan’s security rests on two pillars: US deterrence and the credibility of international law. The first deters coercion from China. The second legitimizes Taiwan’s place in the international community. One is material. The other is moral. Both are indispensable. Under the UN Charter, force is lawful only in response to an armed attack or with UN Security Council authorization. Even pre-emptive self-defense — long debated — requires a demonstrably imminent
Since being re-elected, US President Donald Trump has consistently taken concrete action to counter China and to safeguard the interests of the US and other democratic nations. The attacks on Iran, the earlier capture of deposed of Venezuelan president Nicolas Maduro and efforts to remove Chinese influence from the Panama Canal all demonstrate that, as tensions with Beijing intensify, Washington has adopted a hardline stance aimed at weakening its power. Iran and Venezuela are important allies and major oil suppliers of China, and the US has effectively decapitated both. The US has continuously strengthened its military presence in the Philippines. Japanese Prime
RSS