Vietnam may become the next hot spot for electronics sourcing
By Jim Carbone -- Purchasing, 4/3/2008 11:33:00 AM
Vietnam is increasingly being talked about as having the potential to become the next low-cost location for electronics manufacturing and sourcing.
Some U.S. electronics companies have set up operations there and are building printed circuit boards, printers and other equipment there. Other companies have announced plans to set up factories in Vietnam to build computers and components.
As with China, India and Eastern Europe, Vietnam is attracting the interest of U.S. based and other global electronics companies because it offers cheap labor. The average wage of an electronics assembly work in China is about $1.00 per hour. In Vietnam it is 65-67¢.
While electronics companies are not flocking to Vietnam, some name-brand companies have opened operations there and more will follow. Jabil Circuit, based in St. Petersburg, Fla., has a 55,000 square-foot facility near Ho Chi Minh City where it builds printers for export for Hewlett-Packard.
Sparton Electronics, based in Jackson, Mich., has its Spartronics subsidiary at another industrial park near Ho Chi Minh City, where it has two surface-mount lines.
“We built the factory about four years ago, says Jason Craft, general manager of the facility. “It is a modern facility with all the electronics manufacturing equipment that you would expect to see in a facility anywhere in the world,” he says.
The facility employs about 150 people and builds boards for avionics systems used in commercial planes and boards for industrial equipment.
“Our business is high-mix, low-volume type products,” he says. “The stuff we do is high quality more complex boards.” Spartronics also just started a line for box build.
Craft says there are few local sources for electronics in Vietnam. “We source electronic components everywhere else in Southeast Asia except for Vietnam,” he jokes.
Craft says getting components into Vietnam isn’t a problem. “We have them dropped shipped into Singapore and then we consolidate the shipments because we have components coming in every week,” he says.
Craft says Spartronics will likely expand operations in Vietnam and has an option to lease property adjacent to its present facility. He says eventually high-volume manufacturing will move to Vietnam.
In fact, plans are already under way. Taiwan's Hon Hai Precision Co., the world's biggest electronics contract manufacturer by revenue, has announced it will invest $5 billion over the next five years in factories that will build a variety of equipment.
It’s not just EMS providers who are locating in Vietnam or already operate there.
Taiwanese computer maker Compal is building a facility near Hanoi where it will manufacture laptops. Compal plans to produce 800,000 laptops in 2009 in Vietnam and 6.5 million laptops in 2010. Compal and a number of Taiwanese suppliers will invest about $1.1 billion by 2012 in Vietnam.
Canon has a facility near Hanoi where it builds printers.
Intel Corp., the world’s largest semiconductor company, is building a $1 billion semiconductor testing and assembly plant near Ho Chi Minh City.
The biggest problem Vietnam faces in terms of attracting electronics business is the lack of adequate infrastructure.
“They are talking about building dams and working on the electricity problems and the roads, but those are problems,” says Barnhart.
Infrastructure for logistics is an issue. “There is not a major port in the south. “There are a lot of smaller small craft ports, but no major container port in the south,” he says. There is also not enough electricity to go around
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