Ms. Daphne Lee, Director of Corporate Banking Services at HSBC Taiwan, and Mr. Ahmed Yeganeh, Director of Corporate Banking Services at HSBC Vietnam, shared their insights on the trade corridor between Vietnam and Taiwan, FDI, and the shift in high-tech manufacturing from Taiwan to Vietnam – known as Taiwan’s top investment destination. This sheds light on the broader landscape of strategic and commercial cooperation opportunities between the two economies.
One of Taiwan’s most popular exports to ASEAN is bubble milk tea. This signature drink from the island has become a staple at shopping malls and take-out shops across ASEAN, with an estimated annual turnover of US$3.7 billion. Vietnam, with its population of 100 million, contributed US$362 million to this turnover, ranking third after Indonesia and Thailand.
However, this unique beverage combining tea, milk, and tapioca pearls is not the only Taiwanese success story in Southeast Asia.
Trade between ASEAN and Taiwan reached US$117 billion in 2023, with ASEAN economies accounting for 17.6% of Taiwan’s export value. Since the COVID-19 pandemic, the trade corridor between the two markets has reached new heights, largely due to the rearrangement of supply chains in the electronics industry. Exports from Taiwan to Thailand have nearly doubled since 2019, while exports to Singapore and Malaysia have increased by more than 60%.
Vietnam has emerged as a top investment destination for Taiwanese businesses. According to Vietnam’s Ministry of Planning and Investment, FDI from Taiwan to Vietnam quadrupled in 2023 compared to 2022, reaching a record US$2.2 billion. To date, Taiwan is Vietnam’s fourth-largest investor, with nearly 3,200 projects and a total registered capital of over US$39.5 billion. Additionally, Taiwan has become Vietnam’s fifth-largest trading partner, with bilateral trade currently reaching US$25 billion annually. In the first half of 2024, a total of 39 new investment projects from Taiwan were registered in Vietnam, focusing on electronics, garment manufacturing, and electrical equipment, with a total registered investment capital of US$513.37 million, equivalent to 49% of Taiwan’s total FDI during this period.
Looking ahead, Taiwan’s strength in technology makes it an indispensable link in the future supply chain. And this opportunity is mutually beneficial, as Taiwanese businesses can strengthen their trade links in ASEAN, while international tech companies increasingly view Taiwan as an attractive investment partner to realize large-scale tech innovations.
Strong Linkages
Taiwan is renowned for being a world leader in electronics and semiconductors, accounting for over 70% of the market share of high-end chips. Taiwanese companies manufacture over 80% of the world’s PCs and 90% of its servers.
Meanwhile, Vietnam’s semiconductor industry is projected to reach a value of US$20-30 billion by 2030, with the ambition to become a crucial link in the global semiconductor industry. Vietnam is already taking steps to realize this vision by implementing policies focused on attracting high-quality FDI and enhancing skilled labor training. Vietnam boasts a young and skilled workforce, a strategic geographical location, a growing consumer market, competitive operating costs, and has signed multiple free trade agreements with various countries and territories.
This is where the two trading partners find common ground. Vietnam has become the second-largest recipient of Taiwanese investment in the ASEAN region, only after Singapore. The Binh Duong branch of the Taiwan Trade Association in Vietnam has over 600 members, the highest among all Trade Associations for Taiwanese companies worldwide. Conversely, there are over 250,000 Vietnamese living and working in Taiwan.
Recently, Taiwanese companies have been ramping up investments in more advanced electronics. Such investments will help Vietnam upgrade its workforce skills, increase manufacturing value chains, and attract other suppliers.
Vietnam’s Appeal
The country of 100 million has attracted the attention of Taiwanese investors due to its strong fundamentals and cultural similarities, especially in the high-tech sector.
Vietnam is already familiar with Taiwanese giants in the electronics industry, such as Foxconn, Pegatron, Qisda, Compal, Quanta, and Wistron. More recently, Vietnam received a US$250 million investment from Tripod Technology in the province of Ba Ria-Vung Tau.
With a pivotal shift from labor-intensive industries to skill-intensive ones, the Vietnamese government is offering incentives for high-tech sectors, aiming to attract more quality investments and promising greater benefits for foreign investors, including those from Taiwan.
Due to the level of specialization, intellectual property ownership, and capital costs involved, the most complex manufacturing activities – such as producing the most advanced semiconductors – are likely to remain in Taiwan in the near future. But we can certainly expect more advanced manufacturing to shift to ASEAN and Vietnam in the coming decades as demand rises and the region’s supply chains become more developed.
Vietnam itself has witnessed a strong and broad-based economic recovery, resulting in a 6.9% GDP growth in Q2 2024 and accelerating the growth rate in the first half of 2024 to 6.42%, the second-highest in the last five years. This outstanding performance indicates that Vietnam is on track to achieve a 6.5% growth rate in 2024, becoming the fastest-growing economy in ASEAN. These factors have increased Vietnam’s appeal to international investors, including Taiwanese businesses.
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