Vietnam Economic Update Report

Vietnam experienced a remarkable surge in export growth during the first quarter of 2024, overcoming considerable challenges posed by rising shipping costs. Shipping disruptions in the Red Sea inflated the cost of shipping cargo from Vietnam by a notable 55% to 73%. Despite these obstacles, Vietnam’s trade activity flourished, fueled by increased demand in major export markets and a continued economic recovery post-COVID-19.

Many of Vietnam’s major export markets have rebounded from recession, signaling a positive outlook for the country’s import and export activities. Vietnam’s key market, the United States, saw strong growth with an estimated turnover of 26.06 billion USD, accounting for 28% of total exports and a 25.5% increase compared to last year’s decline.

China follows, estimated at 12.68 billion USD with a 5.2% increase (compared to last year’s decline). The EU market is estimated at 12.1 billion USD, a 16.3% increase (also in contrast to last year’s decline). Korea is estimated at 6.6 billion USD (12.9% increase), and Japan at 5.7 billion USD (6.4% increase), both showing improvement after previous declines.

In Q1 2024, the combined value of imports and exports reached a substantial $178.04 billion, marking a 15.5% increase compared to the same period in the previous year. This expansion was led by a 17% year-on-year jump in goods exports, totaling $93.06 billion. Imports also saw strong growth, rising 13.9% to $84.94 billion. As a result, Vietnam achieved a significant trade surplus of $8.08 billion, exceeding the $4.93 billion surplus recorded in the same quarter of 2023.

Both the domestic and foreign-invested sectors played a critical role in Vietnam’s trade performance. The domestic economic sector generated $25.21 billion in exports, representing a 26.2% increase and accounting for 27.1% of Vietnam’s total export turnover. Meanwhile, the foreign-directed investment (FDI) sector, which includes crude oil, was responsible for $67.85 billion in exports, reflecting a 13.9% increase and a 72.9% share of overall export activity.

Service trade also witnessed considerable growth during the quarter. Service exports were estimated at $5.67 billion, a 24.7% year-on-year increase, while service imports reached $8 billion, rising 26.8%. This resulted in a service trade deficit of $2.33 billion.

The United States maintained its position as Vietnam’s leading export market with a turnover of $26.2 billion. China continued to be the largest import market for Vietnam with a turnover of $29.4 billion.

This trend is evident in the 73% year-on-year surge in foreign direct investment (FDI) registration, reaching $7.1 billion in the first four months of 2024.

A key driver of this interest is the Vietnamese government’s proactive approach to attracting foreign investment in the semiconductor industry. Vietnam is actively refining its legal system, mechanisms, and policies to improve the investment environment, creating attractive incentives for technology companies and conglomerates specializing in semiconductors and electronic chips. This strategy is proving successful, as a growing number of major corporations are expressing interest in Vietnam’s semiconductor sector.

Major corporations like Intel, Samsung, Synopsys, Qualcomm, Infineon, and Amkor already have a presence in Vietnam and are planning to further expand their investments. This ongoing commitment highlights Vietnam’s growing importance in the global semiconductor supply chain.

The recent commitment from the US President to support Vietnam’s participation in the global high-tech value chain, particularly the chip and semiconductor industry, has opened significant opportunities for Vietnam. This has spurred interest from large US semiconductor companies like Nvidia, Apple, Marvell, and GlobalFoundries, which are actively considering establishing chip factories in Vietnam.

Vietnam boasts great potential for developing its semiconductor industry, possessing a young, innovative workforce with relevant training. Companies are increasingly recognizing the value of Vietnam’s skilled labor pool, moving away from solely focusing on cheap labor costs.

The Vietnamese government’s commitment to developing the domestic semiconductor industry, along with its supportive policies and incentives, is a major advantage for corporations looking to invest in Vietnam.

The increasing demand from corporations to invest in Vietnam’s semiconductor industry presents a promising opportunity for Vietnam’s economic growth and its role in the global technology sector. With continued government support and a skilled workforce, Vietnam is well-positioned to become a major player in the global semiconductor supply chain.

This report was compiled with contributions from the team of business experts in our Vietnam office.

ARC Consulting, a division of ARC Group, is an advisory firm specialised in supporting western companies operating in Asia. We are on a mission is to bridge between the business ecosystems of Asia and those in Europe and the US. Our services cover market entry and expansion, ESG, production and sourcing, cross-border M&A as well as operational improvement and compliance.

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