How can the value added of Vietnam’s export industries be increased?

Abstract

Vietnam became an important exporter of cellphones after the introduction of foreign direct investments by multinational companies. Cellphones account for around 20% of Vietnam’s total exports and contribute to its ability to overcome its trade deficit. However, the share of domestic value added in Vietnam’s electronics industry has been declining. This study suggests that this is related to the increase in cellphones as the main export item for Vietnam. Along with the upgrading of products produced in the country, the country’s electronics industry is increasingly relying on the import of parts. By decomposing Vietnam’s major export items—smartphones and printers–this study reveals that parts of the latter are more technologically accessible for domestic manufacturers to supply, while most of the former’s parts are beyond the technical capabilities of local manufacturers. This study suggests that when developing countries such as Vietnam consider targeting an industry to realize its latent comparative advantage, they should consider not only the possibility of gaining an advantage in the assembly of the product but also the possibility of creating backward linkages and developing ancillary industries.

Keywords:

• Electronics
• cellphones
• printers
• value added
• Vietnam

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 “Cellphones” in this paper corresponds to telephones for cellular networks and parts (HS851712, 851770), “Printers” in this paper corresponds to printing, copying, and facsimile machines capable of connecting to personal computers (HS844331, 844332).

2 Calculated from the trade data in UN Comtrade.

3 GDP per capita measured by PPP derive from the World Bank’s “World Development Indicators” database.

4 Estimated production volume of smartphones are from Fuji Kimera Research Institute, various years.

5 One of the authors worked as an employee of a Japanese household electronics manufacturer and was positioned in Thailand during 1997-2003 and 2005-2006, in China during 2003-2004, in Vietnam during 2004-2005, and in Egypt during 2010-2015 as a manager of factories in these countries, taking charge of production, procurement, product development and other tasks.

6 According to a more recent analysis by Xing (2019), however, the proportion of China’s value added in the case of Apple’s iPhone X was 25.4%. Chinese manufacturers supplied several essential components of the product.

Additional information

Funding

Sinology Initiative, Sasakawa Peace Foundation.