R&D opportunities in Vietnam

Vietnam has not only grown to become a manufacturing hub, but in recent years, the country is also becoming an attractive destination for foreign investors to locate their R&D activities. From the investors’ point of view, the rationale is to bring R&D close to manufacturing, and therefore obtain efficiency and cost-savings. For Vietnam, the rise of R&D investment projects further confirms and fosters the country’s attractiveness, but greatly challenges its human resource capacity.

In order to encourage investments into hi-tech, Vietnamese government provides tax incentives and land rental waivers for projects crossing certain thresholds. As a result, in addition to multinationals such as Panasonic, Yamaha, GE, HP, and Piaggio with existing R&D centers in Vietnam, various large enterprises have recently set up or been in progress of establishing their own R&D centers in the country.

Last year, Bosch Vietnam established its Automotive R&D center in Ho Chi Minh City, following a Software and Engineering R&D center established in 2010.

In March 2016, Samsung obtained a certificate of investment for its 300 USD million R&D center project in Hanoi. This project is going to strengthen Samsung’s existing R&D activities in the country, with a Mobile R&D center already established in Hanoi in 2012. Also, this is the company’s biggest Mobile R&D center in South East Asia.

In early August, Japan-based Nidec Corporation met with Ho Chi Minh City’s People Committee to express their intention of establishing an R&D center in the city. By setting up the center, Nidec is going to move some functions with higher intellectual components to Vietnam, and increase the efficiency of products that the company is currently manufacturing in the country.

Another Japanese corporation, the semiconductor manufacturer Renesas Electronics has recently begun to relocate its research activities overseas, to China, Malaysia and Vietnam. In Vietnam, the company employed around 600 researchers at its System-on-Chips development center in Ho Chi Minh City.

Most notably, there have been rumors that Apple is going to establish a data center in Vietnam. The investment, valued up to $1 billion, would function as an R&D center although what technologies Apple plans to develop is still unknown. Recently, leaders from Da Nang city claimed that Apple has approached them regarding the investment location and would make the decision at a joint working session in August.

BDG insights

As interests from foreign investors in locating R&D activities in Vietnam grows, the country will have new opportunities to move up the global value chain. Nevertheless, competent workforce, which is the key to R&D feasibility, remains insufficient. The lack of scientific research at universities and enterprises, and still weak investments in higher education lead to a low number of experienced and trained researchers and technicians. The solution is, apart from greater investments in education and R&D from the government, to encourage R&D activities in local companies, and collaborate with foreign investors to educate own employees and local populations. Without these steps, Vietnam could see major shortage of human resources for future R&D centers to function efficiently.

Sources: 1, 2, 3

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