Vietnam Refuses to Be Reduced to a Plan B Against China

The first quarter of 2026 produced a figure that deserves close attention: foreign direct investment recorded in Vietnam jumped 42.9% year-over-year. This is not a statistical anomaly. It is the measure of a shift that has been accelerating for several years and whose true scale we are only beginning to see.

Vietnam is no longer simply the country that manufactures Nike shoes and H&M t-shirts more cheaply than China. It now attracts Samsung, Intel, LG, and NVIDIA. It negotiates semiconductor partnerships with the United States and Japan. It aims for renewable energy production that would make its manufacturing industry credible in low-carbon supply chains. And its GDP grew 8.02% in 2025, making it one of Asia’s most dynamic economies.

The question is no longer whether Vietnam benefits from the recomposition of global industrial chains. It is whether it can transform this inflow of capital into genuine industrial upgrading — and what that changes for Asia’s industrial map.

The Essential Points

  • FDI recorded in Vietnam advanced 42.9% in the first quarter of 2026, with Singapore becoming the top investor ahead of South Korea and Japan, according to the Vietnam National Statistics Office.
  • Manufacturing and processing contributed approximately 31.49% to GDP growth in 2025 (NSO), with manufacturing value added representing roughly 24% of GDP (World Bank, 2024), dominated by electronics and semiconductors.
  • The investment inflow collides with a structural shortage of qualified engineers: the government aims for 50,000 semiconductor engineers by 2030, an unprecedented training effort in the country.
  • The Western bet on supply chain diversification now partially rests on Vietnam’s ability to maintain this trajectory — with the geopolitical risks that entails.

Singapore Ahead of South Korea: What the Geography of Investors Reveals

What the Q1 2026 figures reveal beyond the overall amount is the composition of investors. Singapore has dethroned South Korea to take first place. This shift cannot be explained solely by financial geography — Singapore often serves as a regional hub for capital originating elsewhere. It reflects a strategic choice by Asian and Western firms based in the city-state: Vietnam is now the natural relay for their expansion in Southeast Asia.

South Korean investments remain massive. Samsung made Vietnam one of its most important production sites in the world long ago — Bac Ninh province houses factories that assemble a significant fraction of Galaxy smartphones. LG follows a similar trajectory in consumer electronics. But these South Korean operations, built over the previous decade, are now being challenged by a new wave of investors attracted by a different argument: the semiconductor chain.

NVIDIA announced an artificial intelligence research center in Hanoi. Intel has maintained for years its chip testing and assembly site in Ho Chi Minh City, which constitutes Intel’s largest assembly and testing facility in its global network, across all locations. These operations do not yet manufacture the chips themselves — manufacturing remains in South Korea, Taiwan, and Japan. But they constitute the first links in a supply chain that the Vietnamese government wants to build over ten to fifteen years.

Textiles First, Electronics Next, Semiconductors Tomorrow

Vietnam’s sectoral trajectory resembles, with a twenty-year lag, South Korea’s path in the 1980s. Seoul had begun with textiles and shoes, then moved into steel and automobiles, then electronics, then semiconductors. The transition was not automatic: it resulted from deliberate industrial strategy, massive investments in education and research, and a state that knew how to negotiate technology transfers without being reduced to cheap labor.

Vietnam is reproducing this pattern, with accelerators that South Korea did not have. The recomposition of global chains under the effect of Sino-American tensions offers Vietnam an unprecedented window of opportunity. Western and Japanese companies are actively seeking to reduce their dependence on China — what industrial strategists call “China plus one,” sometimes “China plus two.” Vietnam is often the first choice, for reasons combining wage costs, relative political stability, geographic proximity to Asian suppliers, and favorable trade agreements.

The free trade agreement with the European Union, in force since 2020, eliminated tariffs on the vast majority of Vietnamese products exported to the European market. Membership in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership opens Japanese, Canadian, and Australian markets under preferential conditions. These agreements make Vietnam a commercial node difficult to ignore for any company seeking to diversify its production.

According to the NSO, manufacturing and processing contributed 31.49% to GDP growth in 2025, and manufacturing value added represents approximately 24% of GDP (World Bank, 2024). This statistic masks a qualitative transformation: the share of electronics and technology products in exports has displaced textiles for several years. Semiconductors, solar modules, and telecommunications equipment now represent the bulk of exported value.

The Missing Engineer: The Real Bottleneck

The inflow of factories is structurally faster than the capacity to train the skilled workers these factories need. This is the paradox of Vietnamese success, and it is the most serious risk weighing on its industrial upgrading.

The government is aware of it. It has set a precise objective: 50,000 engineers trained in semiconductors by 2030. Behind this figure lies infrastructure to be built. Hanoi National University, Ho Chi Minh City University of Technology, and several other institutions have launched new microelectronics programs. Partnerships with American, South Korean, and Japanese universities are being put in place to accelerate the training of trainers. Intel directly participates in designing academic programs at its sites.

But 50,000 engineers in five years is an ambitious target for a country whose university system long privileged memorization over innovation, theory over experimentation. Foreign companies operating in Vietnam regularly complain about the gap between available graduates and the skills they need. Design engineer or process engineer positions in semiconductors demand years of experience on top of the diploma — experience Vietnam cannot yet produce locally on a large scale.

This bottleneck is not fatal. South Korea had the same problem in the 1980s. It resolved it through massive public investment in technical universities, by sending thousands of students to the United States and Japan, and through policies attracting foreign-trained Koreans from the diaspora. Vietnam is doing the same — but on a much shorter timeline, with more complex industrial objectives. The acceleration of productivity gains that artificial intelligence tools now bring to technical training could, according to some analyses, partially compress this timeline. This is not assured.

What Geopolitics Offers and Can Take Back

Vietnam has benefited from a rare alignment of geopolitical planets. Sino-American tensions, Western governments’ desire to reduce dependence on Chinese chains, the American CHIPS Act encouraging companies to diversify their location, Japanese and South Korean policies for partial relocation — all of this created structural demand for precisely what Vietnam offers.

But this same geopolitics contains risks that Hanoi manages carefully. Vietnam shares a long border with China, maintains deep commercial relations with it — China remains one of its principal suppliers of components and raw materials — and seeks not to be perceived as a Western pawn in Sino-American rivalry. Vietnamese foreign policy, inherited from decades of navigating among great powers, maintains an official doctrine of non-alignment. Hanoi normalized relations with Washington in 1995, adhered to the American strategic partnership in 2023, while maintaining close economic and diplomatic ties with Beijing.

This balancing position is a geopolitical asset — it allows Vietnam to welcome investments from both blocs without being forced to choose. But it is also fragile. An escalation in the Taiwan Strait, a major commercial shock between the United States and China, or a Washington decision to impose stricter technology restrictions on companies operating in countries deemed insufficiently aligned could call into question the current trajectory. This is not a central scenario, but it is a risk that investors are evaluating.

For the Western bet on supply chain diversification in semiconductors, Vietnam is an important piece but not sufficient. Europe has its own industrial shortcomings in high-technology sectors. The United States is also betting on India, Mexico, and Malaysia. The lesson that the pandemic and the war in Ukraine taught Western industrial planners — never depend on a single country for a critical component — applies to Vietnam itself as well.

Energy as a Condition for Industrial Competitiveness

One less publicized aspect of Vietnamese industrial upgrading deserves attention: the energy question. Advanced semiconductor and electronics factories consume massive amounts of electricity. Major technology companies, under pressure from their shareholders and European regulators, demand guarantees from their suppliers about the source of consumed energy. Samsung, Intel, and their peers want renewable energy certificates for sites producing their components.

Vietnam experienced spectacular expansion of solar and wind between 2019 and 2022, driven by guaranteed buyback rates that attracted private developers. Installed renewable energy capacity exploded, making the country one of the best-endowed in Southeast Asia for solar energy. But grid infrastructure did not follow the same pace: transmission lines are insufficient, some regions suffer blackouts despite theoretical excess capacity, and the regulatory framework for power purchase agreements for industrial companies long lacked clarity.

The government launched a revised electricity development plan — Power Development Plan 8 — aimed at correcting these imbalances and significantly extending the transmission network. Foreign companies are negotiating renewable energy purchase agreements (PPAs) directly with local developers. If these conditions stabilize, Vietnam’s energy advantage could become an additional competitive argument against other destinations for Asian diversification. The race for clean energy for advanced industry is also being played out in emerging countries, not just in advanced economies.

What Vietnam’s Trajectory Says About Asia’s Map

Vietnam is not alone in this race. India is accelerating its import substitution policy and attracting massive investments in electronics — Apple has begun assembling iPhones there, and the Modi government subsidizes chip manufacturers. Malaysia, which already hosts semiconductor assembly and testing sites since the 1970s, is upgrading toward advanced chip design. Indonesia, with a population of 280 million and an immense domestic market, attracts capital in batteries and electronics.

This competition is not zero-sum. Southeast Asia as a whole benefits from global industrial redeployment, and regional value chains are sufficiently integrated for one country’s industrial upgrading to benefit its neighboring suppliers. The Asian model of sequential industrialization — textiles, assembly, electronics, high technology — remains a reference, even if other regions struggle to reproduce it under the same conditions.

What Vietnam’s trajectory says about Asia’s industrial map is that recomposition is deeper than a simple displacement of factories. Value chains are being redrawn around new centers of gravity, and Vietnam has enough assets to claim to be one of them. But the difference between a country that hosts factories and a country that upgrades industrially rests on a variable difficult to plan: the capacity to train engineers who innovate, not just assemble.

The objective of 50,000 semiconductor engineers by 2030 is less a figure than a bet on the nature of Vietnam’s economy in 2035. If the bet holds, Vietnam will be something substantially different from what it is today. If training does not keep pace with investment, the country risks remaining a sophisticated assembly site rather than becoming a design actor. This is the tension the coming years will resolve.

Sources

  1. Vietnam Briefing — Vietnam FDI Update: Q1 2026 Performance and Key Trends
  2. Vietnam National Statistics Office — 2025 GDP data and manufacturing statistics
  3. Vietnam Ministry of Planning and Investment — 50,000 semiconductor engineers target, national program 2024-2030
  4. Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) — text and list of members
  5. European Union-Vietnam Free Trade Agreement (EVFTA) — European Commission
  6. Vietnam Power Development Plan 8 — Ministry of Industry and Trade of Vietnam
  7. NSO Vietnam – 2025 GDP and Q4 2025 economic data
  8. Vietnam.vn – FDI Q1 2026 +42.9%
  9. VOV – Singapore #1 Investor Q1 2026
  10. NVIDIA Newsroom – Hanoi R&D Center
  11. Intel / AmCham Vietnam – IPV HCMC Site
  12. European Commission – EVFTA in force August 1, 2020
  13. DFAT Australia – CPTPP Vietnam member since January 2019
  14. Vietnamese Government – 50,000 Semiconductor Engineers Target
  15. World Bank – Manufacturing Share in Vietnamese GDP
  16. NSO Vietnam – Electronics Surpassing Textiles Since 2019