Vietnam: From Catfish to Computers

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The most recent example of this trend is Jabil Circuit (JBL) of St. Petersburg, Fla., which in June began operations at its facility in Saigon Hi-Tech Park in Ho Chi Minh City, where it makes laser printers for HP. Jabil plans to spend up to $100 million on its operations in Vietnam, which is increasingly seen as an alternative to China.

"Vietnam will be able to offer us competitive costing," says C.C. Lum, Jabil's regional commodity manager for Asia Pacific. "It is also important to have a location outside China." While the minimum wage in Vietnam of about $60 per month is less than in much of coastal China, Lum says that China's extensive network of component suppliers still gives it the edge.

Training a Young Workforce

But Vietnam's reliance on imported parts will change as more suppliers follow their customers. Allied Technologies (AMOT) of Singapore operates three separate divisions supplying Jabil. In operation since 2005, it now employs 250 workers in metal stamping, plastic molding, and extrusion facilities for parts Jabil uses to produce HP printers.

Another big challenge is training Vietnam's young yet inexperienced workforce. The government hopes to double the number of qualified IT workers to 330,000 by 2015, of whom 240,000 will be electronics and telecom specialists. It aims for 15,000 with masters or doctorate degrees.

That's an ambitious target. In 2006, Vietnam had roughly 9,000 IT graduates, according to the Vietnam Software Assn. Lam Nguyen, director of IDC Vietnam, says the country could become a strong player more quickly if it could tap into the pool of overseas Vietnamese talent. "These overseas Vietnamese would transfer technical knowledge and innovation/creative leadership to assume cost advantages," he says.

Overseas Companies Investing

As in other emerging markets, the industry itself will take the lead in developing appropriate skills. For example, Altera (ALTR), of San Jose, Calif., on June 4 announced it would establish a technology center in Ho Chi Minh City to support its global chipset development network. This is part of Altera's strategy to develop its international contingent of engineers.

One of the first overseas companies to recognize the importance of investing in the local labor force was Japanese semiconductor design company Renesas Technology. In 2004 it established Renesas Design Vietnam, which develops LSI [large scale integrated] devices for applications in consumer electronics, mobile products, and automobiles.

"The young engineers are relatively excellent, smart, and very serious about study and work," says Tsuneo Sato, chief executive officer of Renesas Vietnam, which employs 150 and plans to expand to 500 in two or three years.

He also says that unlike the Chinese, workers in Vietnam "don't so frequently job hop." However, that's likely more a function of supply and demand for engineers—and as others wake up to the idea of the country's IT potential, staff turnover will become a big challenge there, too.

Balfour is Asia Correspondent for BusinessWeek based in Hong Kong.