Vietnam’s Next Growth Chapter: From Manufacturing Scale to Regional Competitiveness

Vietnam has captured a significant share of the manufacturing capacity moving out of China as companies respond to cost pressures, tariffs, and the need to diversify their production base. This shift has strengthened the country’s role in global manufacturing and supply chains.

The next step is to move beyond low-cost assembly and develop stronger engineering, local supplier, technology, and innovation capabilities. Vietnam’s growing Free Trade Agreement (FTA) network also gives domestic companies opportunities to expand beyond traditional export markets.

These priorities were central to the Frost & Sullivan Growth Webinar, “Profitable Growth for Vietnamese Companies: From Resilience at Home to Regional Scale.” During the session, growth experts examined Vietnam’s economic performance, its move toward higher-value manufacturing, changing trade and supply chain patterns, and the sectors supporting consumer spending.

The Session Brought Together the Following Growth Experts:

Click here to access the on-demand recording.

Here Are Some Highlights of the Discussion:

Vietnam Is Moving Beyond the China Plus One Narrative

Vietnam has benefited from the diversification of global manufacturing and supply chains beyond China. However, its economic performance and domestic demand are also strengthening its position as a market in its own right.

Three factors support this shift:

• Resilient economic growth: Vietnam continues to stand out as several major markets experience slower growth. Manufacturing, foreign direct investment, exports, and domestic consumption are supporting this momentum.
• AI-related export demand: Global demand linked to the AI and semiconductor boom is supporting Vietnam’s export growth. This presents an opportunity for Vietnamese companies operating in technology- and export-related sectors.
• Domestic market potential: Vietnam’s growth opportunity is not limited to exports. Companies can also serve demand within the domestic economy.

For businesses, this creates a dual growth path. Vietnamese companies can deepen their position in the domestic economy while using the country as a base for regional and global expansion.

Trade Diversification Can Open New Export Markets

Vietnam had approximately 20 FTAs in place as of 2026, including a recent agreement with the United Arab Emirates. However, only around 30% to 40% of the country’s export turnover was linked to FTA-related trade, indicating that many companies had yet to make full use of the available benefits.

Three actions can help businesses capture this opportunity:

• Explore new export markets: Companies trading mainly with established markets such as the United States and China can consider other economies covered by Vietnam’s FTAs.
• Use preferential tariffs: Lower or zero tariffs can make Vietnamese exports more competitive in FTA markets.
• Build international partnerships: As more foreign investment enters Vietnam, domestic companies can collaborate with international businesses and jointly pursue opportunities in overseas markets.

Making fuller use of these agreements can help Vietnamese companies move beyond traditional markets and identify new export opportunities.

Manufacturing Scale Is the Foundation, Not the Finish Line

As Ravi Krishnaswamy described Vietnam has won the first manufacturing “race of scale.” The country has captured a significant share of the manufacturing capacity moving out of China as companies respond to cost pressures, tariffs, and the need to diversify production.

The next step is to move further up the manufacturing value chain. This will require stronger engineering capabilities, a deeper local supplier base, and greater focus on Vietnamese brands and intellectual property.

The webinar outlined three priorities:

• Improve productivity in established industries: Vietnam can build on its base in electronics assembly, textiles, footwear, F&B, and furniture by scaling these industries more efficiently.
• Strengthen local capabilities: Industrial machinery, precision engineering, industrial services, and EV components can help develop a local ecosystem that supports major manufacturers.
• Develop frontier technology expertise: Semiconductors, medical devices, robotics, and physical AI present opportunities for future growth. Capturing them will depend on Vietnam’s engineering talent, science, technology, engineering, and mathematics (STEM) capabilities, and ability to develop intellectual property.

These priorities can help Vietnam use its manufacturing scale as a base for higher-value activities.

Semiconductors Can Help Vietnam Move Up the Value Chain

The semiconductor industry is placing greater emphasis on design, packaging, integration, and testing. Vietnam can build on its electronics, engineering, and software capabilities to participate in these areas.

Four areas stand out:

• Design engineering: Integrated circuit design, embedded software, and product-test engineering offer opportunities for Vietnam to strengthen its role in the semiconductor industry.
• Electronics capabilities: Modules, sensors, control systems, and power systems can deepen the country’s electronics expertise.
• Packaging and testing: High-complexity assembly, system-level testing, and advanced packaging are areas where future semiconductor growth could emerge.
• Supporting capabilities: Precision parts, clean-room capabilities, industrial gases, equipment components, and maintenance services can help Vietnam increase its share of semiconductor value creation.

These opportunities form part of a broader Southeast Asian semiconductor ecosystem, with countries across the region contributing complementary capabilities. Partnerships with Taiwan, South Korea, China, Japan, and the United States will also remain important.

Growth Opportunities Are Expanding Across Multiple Sectors

Semiconductors are only one part of Vietnam’s emerging opportunity landscape. The discussion identified several sectors in which companies can create value by combining domestic capabilities with growing regional and global demand.

• Automotive and EVs: Battery packs, electric motors, diagnostics, charging solutions, precision metals, and related components present opportunities across the automotive and EV sectors.
• Consumer goods and F&B: Premiumization, cold-chain capabilities, and consumer analytics are among the areas companies can explore.
• Healthcare and education: These sectors are among the areas driving consumer spending in Vietnam.
• Textiles, footwear, and furniture: These established industries remain important parts of Vietnam’s manufacturing base, with productivity as a key priority.
• Supporting industries: Testing, certification, energy services, automation, and industrial software can support the development of Vietnam’s manufacturing sector.
• Tourism and infrastructure: Tourism is supporting the consumer economy, while infrastructure development is another area of strong activity.

This range of sectors gives Vietnamese companies several routes to pursue growth across manufacturing, supporting services, and the domestic economy.

A Phased Roadmap for Vietnam’s Manufacturing Transition

Vietnam’s move toward higher-value manufacturing will take place in stages. In the next few years, the focus will be on improving factory capabilities, productivity, logistics, and workforce training. Between 2028 and 2031, attention will shift toward building clusters around components, materials, engineering, and production.

Beyond that period, Vietnam can focus on developing intellectual property, expanding into high-value areas such as advanced semiconductor packaging, and building regional brands.

For Vietnamese companies, three priorities stand out:

• Target specific value pools: Companies can identify focused opportunities within sectors rather than approaching each industry as a whole.
• Build capabilities through partnerships: Partnerships can help companies acquire technology and develop the expertise needed to move up the value chain.
• Invest in engineering and innovation: Research and development, product design, and intellectual property will be important as companies move beyond low-cost manufacturing.

This phased approach can help Vietnamese companies strengthen their current operations while preparing for higher-value manufacturing opportunities.

Click here to access the on-demand recording.

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