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Will Vietnam pull it off?

Nokia broke new ground with its manufacturing facility in Vietnam in April 2012. Spread over 17 hectares and employing 10,000 people, the new facility will serve the company’s global market for mobile phones. Nokia isn’t alone – there is a growing list of companies locating manufacturing in Vietnam to manage rising costs in China.

Vietnam surpassed China as the biggest source of footwear for Nike in 2010. Technology firms such as Intel and Samsung have also built factories in Vietnam and are ramping-up production. Likewise, GE has opened a new plant to manufacture wind-turbines.

While labor costs in Vietnam are typically 30-40% lower than coastal China, it falls short in some areas – especially when compared to China’s reliable and sophisticated supply chain. Further, Vietnam’s domestic market is much smaller compared to China’s and its labor productivity remains low. In terms of production and export volume, China continues to dwarf Vietnam into the foreseeable future.

Despite that, Vietnam is fast narrowing the gap and catching up with China.

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