The investment landscape of Taiwanese enterprises in Vietnam in the first 6 months of 2024

DNHN - In the first 6 months of 2024, Taiwanese enterprises in Vietnam increased investment, expanded project scale, and focused on manufacturing and high technology. Investment capital increased in both quantity and scale.

The Journal of Business and Integration introduces the article by Mr. John Campbell, Deputy Director, Industrial Real Estate Services, Savills Vietnam.

The year 2023 marks the 30th anniversary of the establishment of the Taiwan Chamber of Commerce in Hanoi. In 2024, the chambers of commerce in Ho Chi Minh City and Dong Nai province will also mark three decades of operation. These milestones indicate Taiwan's long-term investment commitment in Vietnam and the strong business relationship between the two economies.

In the first 20 years after Vietnam implemented the Doi Moi economic reform program, Taiwan was the largest source of foreign investment in Vietnam, creating many jobs and contributing to the country's socio-economic development journey. As of June 2023, Taiwan ranked fourth in investment capital with 3,186 projects and USD 40.23 billion, accounting for 8% of total FDI into Vietnam since 1988.

Since then, Taiwanese FDI in Vietnam has continued to grow steadily. A survey by the Taiwan Ministry of Economic Affairs shows that about 18% of Taiwan's traditional manufacturing enterprises have expressed interest in investing in Vietnam, highlighting the attractiveness of this market.

The increase in investment aligns with Taiwan's New Southbound Policy (NSP), which enhances cooperation with Southeast Asian countries. Since its inception in 2016, this policy has significantly strengthened cooperation with Southeast Asian economies, bringing great benefits to Vietnam's high-tech electronics industry.

Electronics and Semiconductors experience explosive growth

Taiwanese investors favor Vietnam's young and increasingly skilled labor force, stable business environment, competitive labor and construction costs, geographical proximity to source and consumption markets, and active participation in many free trade agreements (FTAs).

Recently, more and more Taiwanese manufacturers have established a strong foothold in Vietnam with a vision to diversify supply chains and minimize product risks, including major electronics groups such as Foxconn, Pegatron, Compal, and Wistron.

Vietnam aspires to become a semiconductor manufacturing hub, while Taiwan is famous for its successful semiconductor industry. Therefore, these Northeast Asian investors can provide valuable expertise that Vietnam can leverage to achieve its goals. According to our observations, the northern region is expected to continue attracting electronic and semiconductor investments from Taiwan, while the southern region is likely to receive medium-value manufacturing projects.

In 2023, Vietnam successfully attracted USD 36.6 billion in FDI, more than four times higher than in 2022. Taiwan was the sixth-largest investor with USD 2.88 billion, accounting for 8% of total registered FDI and increasing by 13% compared to 2022. This performance reinforces the strong and long-term economic relationship between the two regions. Electronics remained the largest manufacturing sector from Taiwan in 2023.

Taiwanese manufacturing FDI in the first 6 months of 2024

In the first 6 months of 2024, Vietnam attracted a total of USD 15.18 billion in registered FDI, up 13% over the same period last year. Manufacturing accounted for 70% with USD 10.68 billion registered, a significant increase of 26% over the same period. Of this, there were 541 new manufacturing projects registering USD 6.82 billion, 390 existing manufacturing projects increasing capital, and 190 projects with capital contributions and share purchases.

In terms of total registered FDI, Taiwan was the sixth-largest investor with USD 1.05 billion, accounting for 7% of total capital, with 88 new projects registering USD 529.8 million, 46 existing projects increasing capital by USD 392.9 million, and 93 projects with capital contributions and share purchases up to USD 129 million.

In the first 6 months, Taiwan had 39 new manufacturing projects registered in Vietnam with a total value of USD 513.37 million, accounting for 49% of Taiwan's total FDI during this period. Of these, 22 projects were in the north and 17 projects in the south. Although the north attracted more new manufacturing projects, the south recorded the majority of investment value with USD 285.4 million. This difference is mainly due to the large USD 250 million investment by Tripod Technology Company in Chau Duc Industrial Park in Ba Ria-Vung Tau province.

According to our data, among the 39 new Taiwanese manufacturing projects in the first 6 months of 2024, there were 24 industrial land transactions and 15 factory projects. Projects requiring industrial land dominated in revenue, accounting for 92% of investment capital. However, factory transactions, accounting for 38% of total projects, show the increasing demand from many Taiwanese manufacturers, from suppliers to large electronics groups, medium-value industries as well as small and medium enterprises.

These companies often do not require large land funds and prefer short-term leases due to dependence on customer contracts. This demand creates opportunities for factory and warehouse developers in Vietnam. For example, BW Industrial Development, Vietnam's largest rental industrial real estate developer, currently has 18 Taiwanese tenants, including Jusda, Sable Speaker Solutions, FSP Group, and Alltop.

Regarding investment activities by province, Ba Ria-Vung Tau emerged as it accounted for the majority of investment value with USD 264.1 million, equivalent to 51%, thanks to Tripod Technology Company. According to the Industrial Services Department of Savills, while most of Taiwan's electronics investments focus on the northern region, Tripod's investment in Sonadezi Chau Duc Industrial Park shows the potential of the southern region.

Thanh Hoa ranked second with 23% and Ha Nam ranked third with 8%, but had the highest number of projects with six new Taiwanese manufacturing projects. Besides Ba Ria-Vung Tau, the remaining provinces in the top 5 manufacturing investments are all in the north. However, Dong Nai also achieved significant success, ranking sixth, receiving a total investment of USD 9.6 million, including one project from TD Hitech Energy Inc.

By industry, the electronics sector led in investment value with four projects, totaling USD 255 million, accounting for 50%. The garment industry ranked second, accounting for 24% with 5 projects, followed by electrical equipment with 11% with 7 projects.

Wistron Company was behind Tripod Technology Company, making the second-largest Taiwanese electronics manufacturing investment in the first 6 months of 2024 with USD 24.5 million.

When we look at Taiwanese manufacturing FDI in recent years, the most notable trend is the strong increase from 2022 to 2023, highlighting the seriousness of Taiwanese investors in diversifying the supply chain to Southeast Asia after the pandemic. Specifically, new registered Taiwanese manufacturing FDI in 2023 was USD 1.87 billion, nearly 8.7 times higher than in 2022. In the first 6 months of 2024, Vietnam attracted over USD 513 million from new Taiwanese manufacturing investments, and is expected to increase significantly by the end of the year as many large electronics projects complete registration.

John Campbell - Deputy Director, Industrial Real Estate Services, Savills Vietnam