Search

 

Cablegate: Foreign Electronic and Technology Investors Flocking To

VZCZCXRO9678
RR RUEHCHI RUEHCN RUEHDT RUEHGH RUEHHM RUEHNH RUEHVC
DE RUEHHI #0372/01 0920442
ZNR UUUUU ZZH
R 010442Z APR 08
FM AMEMBASSY HANOI
TO RUEHC/SECSTATE WASHDC 7516
INFO RUEHHM/AMCONSUL HO CHI MINH 4526
RUCNASE/ASEAN MEMBER COLLECTIVE
RUEHOO/CHINA POSTS COLLECTIVE

UNCLAS SECTION 01 OF 02 HANOI 000372

SIPDIS

STATE FOR EAP/MLS, DRL/AWH AND EEB/CIP

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ECPS EINV TINT ECON TSPL KIPR ELAB VM
SUBJECT: FOREIGN ELECTRONIC AND TECHNOLOGY INVESTORS FLOCKING TO
NORTHERN VIETNAM

REF: HCMC 320 (Labor Pressures On Manufacturers)

HANOI 00000372 001.2 OF 002


1. (SBU) Summary: Samsung's recently-announced plans to build a $670
million mobile phone manufacturing plant is the latest in a series
of major investments in Vietnam by international electronics and
technology firms. A number of these new investments are planned for
Hanoi and surrounding provinces in the north, demonstrating that
this region is a growing focus for investors. Vietnam's low labor
costs, improving business and investment climate and stable economic
growth are all cited as reasons investors are choosing Vietnam - in
some cases in lieu of China. This influx of high-tech investment
will challenge Vietnam to address problems with poor infrastructure,
lack of human resources and weak protection of intellectual property
rights. End summary.

JUMPING ON THE BANDWAGON
------------------------

2. (U) An announcement this month that Samsung plans to build a $670
million mobile phone manufacturing plant in Bac Ninh Province, north
of Hanoi, is the latest in a series of announcements on significant
investment in Vietnam by major electronics and technology firms.
Intel is building a $1 billion chip assembly and testing plant near
HCMC, and other U.S. firms such as V-CAPS, a USD 300 million joint
venture chip testing facility, and Emerson Electric, which is
building electric power supplies, mobile phones and cell towers are
establishing operations here. Taiwan's Foxconn Technology plans to
invest up to $5 billion mostly in the north to build digital
cameras, PC mainboards, computer components and music players;
Taiwanese firm Compal Electronics is constructing a $500 million
laptop factory; Japanese companies including Canon, Sanyo, Sony and
Panasonic, among others, have also recently expanded manufacturing
operations here. Several major firms, including Intel, Matsushita
Electric (a contractor for Panasonic) and Nidec (computer drive
manufacturers) also announced plans to open research and development
centers.

3. (U) This wave of foreign technology and electronics investors is
bringing a number of suppliers and sub-contractors in its wake, and
is creating opportunities for local and foreign firms. Compal
Electronics is reportedly calling on at least ten of its suppliers
to invest in Vietnam to provide parts locally for its facilities.
Taiwan's Chi Mei Optoelectronics (CMO), the world's fourth largest
LCD display producer, was already persuaded by Compal Electronics to
set up manufacturing facilities here in partnership with local
computer parts manufacturer Wistron. CMO also supplies computer
manufacturers Hon Hai and Acer, who already have plants in Vietnam.
Additional Taiwanese parts manufacturers including HannStar Board,
Gold Circuit Electronics, Unimicron Technology and others have
recently visited Vietnam to expore possible investments here.

MOST NEW ADDRESSES ARE IN THE NORTH
-----------------------------------

4. (U) While HCMC has been, and continues to be, a significant
destination for high-tech investment (Reftel), a number of these new
announcements are located in northern Vietnam, demonstrating that
the north is also a growing focus for investors. U.S. firms V-CAPS
and Emerson Electric have identified this region for a number of
their new investments. Canon produces printers in Bac Ninh Province
and Hanoi, and plans to build another multi-million dollar factory
in Bac Ninh. Much of Foxconn's $5 billion investment is planned for
the northern provinces of Bac Ninh and Bac Giang. In 2007, Taiwan's
Hon Hai began development of a $1 billion manufacturing complex
outside Hanoi to produce computers, communications equipment and
consumer electronics. CMO is working with Winstron to develop a 740
acre complex in Hanoi for its own planned facilities, with room for
up to 20 more manufacturers on site.

5. (SBU) The Ministry of Planning and Investment's (MPI) Legal
Department Deputy Director told EconOff that the Government of
Vietnam (GVN) has not created any special incentives for these
companies to invest in the north. Instead, he attributed this new
trend to: 1) proximity and close connections with China, where many
of the components and parts are currently manufactured; 2) improving
infrastructure in the north; and 3) overstretched infrastructure and
labor supply in the south, where much of the new investment has been
located in recent years.

LURING INVESTMENT AWAY FROM CHINA?
----------------------------------

6. (U) Media reports and interviews with executives from these
technology firms indicate that companies are choosing Vietnam
because of its relatively inexpensive labor force, improving
investment climate, and its consistently high level of economic
growth over the past decade. Others have pointed specifically to

HANOI 00000372 002.2 OF 002


Vietnam's recent WTO accession as influencing their decision, as it
is now more efficient and cheaper to import parts and export final
products.

7. (SBU) An official in MPI's Foreign Direct Investment Department
suggested to EconOff that many of these firms are looking to Vietnam
to diversify their risks and "hedge the bets" of their Chinese
investments. Rising labor costs, the revaluation of the Yuan and
compliance with China's recently-enacted environmental and labor
laws are all making investment in China more expensive, and
therefore less attractive, he continued. Recent press stories
underscore his analysis, with reports in Vietnamese papers saying
that Japan's Olympus Group will soon close a camera factory in China
and build a $44 million plant in Vietnam. Similar stories have the
Netherlands' Philips also exploring the possibility of moving some
or all of its $8 billion annual order of parts from China to
Vietnam.

COMMENT
-------

8. (SBU) Annual growth rates of 25 to 40 percent in the electronics
and IT sectors over the past several years, combined with this wave
of recent investment, are creating challenges for Vietnam. Although
infrastructure in the north is improving, the GVN will need to
continue to invest significantly in roads, ports and power
generation capacity to keep up with the growing demand created by
these new factories. Vietnam will also need to step up efforts to
protect and enforce intellectual property rights, a critical factor
for electronics and technology investors. Perhaps most acute,
however, will be the crunch for qualified human resources. Samsung
expects to provide 20,000 local jobs at its mobile phone
manufacturing plant, Foxconn plans to hire up to 50,000 workers and
Compal estimates it will employ 40,000 Vietnamese at its new
facilities. Most will likely be low-skill jobs, but as U.S.
companies have reported recently, it is increasingly difficult to
find qualified engineers, technical staff and mid-level managers
necessary for operations of this size. To avoid damming this flow
of new high-tech investment, Vietnam will need to quickly find a way
to train its citizens in these critical skill sets or cooperate with
foreign firms and donors to address this shortcoming.

9. (U) This cable was coordinated with Consulate General Ho Chi Minh
City.

MICHALAK

© Scoop Media

 
 
 
 
 
World Headlines

 

Werewolf: Gordon Campbell On North Korea, Neo-Nazism, And Milo

With a bit of luck the planet won’t be devastated by nuclear war in the next few days. US President Donald Trump will have begun to fixate on some other way to gratify his self-esteem – maybe by invading Venezuela or starting a war with Iran. More>>

Victory Declared: New Stabilisation Funding From NZ As Mosul Is Retaken

New Zealand has congratulated the Iraqi government on the successful liberation of Mosul from ISIS after a long and hard-fought campaign. More>>

Gordon Campbell: On The Current US Moves Against North Korea

If Martians visited early last week, they’d probably be scratching their heads as to why North Korea was being treated as a potential trigger for global conflict... More>>

ALSO:

Gordon Campbell: On The Lessons From Corbyn’s Campaign

Leaving partisan politics aside – and ignoring Jeremy Corbyn’s sensational election campaign for a moment – it has to be said that Britain is now really up shit creek... More>>

ALSO:

Another US Court: Fourth Circuit Rules Muslim Ban Discriminatory

ACLU: Step by step, point by point, the court laid out what has been clear from the start: The president promised to ban Muslims from the United States, and his executive orders are an attempt to do just that. More>>

ALSO:

 
 
 
 
 
 
  • Pacific.Scoop
  • Cafe Pacific
  • PMC