Vietnam’s emergence as a serious manufacturing export economy over the past decade has been one of the most credible structural stories in emerging markets. The numbers are not disputed, but the structural constraints on how far this goes are growing in visibility. Foreign direct investment into Vietnam reached USD 25.4 billion in 2024, a record, driven by electronics, semiconductors, and consumer goods manufacturers diversifying supply chains away from China. Vietnam’s merchandise exports reached approximately USD 371 billion in 2024, up from around USD 214 billion in 2018. The share of electronics and electrical equipment in that export basket has risen from roughly 30 percent to over 38 percent in six years.
The companies behind these numbers are not speculative early movers. Samsung manufactures approximately 40 to 50 percent of its global smartphone output in Vietnam, through facilities in Bac Ninh and Thai Nguyen. Intel’s assembly and test facility in Ho Chi Minh City is one of the company’s largest globally. LG, Foxconn, Luxshare, and Pegatron all have significant and expanding Vietnamese manufacturing footprints. The narrative that Vietnam is capturing manufacturing diversification from China is not a forecast. It is an accomplished fact.
The question that deserves more serious treatment than the bull case typically provides is: what are the constraints on how far this goes? Several are structural, not cyclical, and they are growing in visibility among the multinationals who are now deep enough into their Vietnam operations to encounter them operationally rather than in a due diligence memo.
Vietnam’s Power Grid Cannot Keep Pace With Manufacturing Demand Growth
Vietnam’s electricity demand has been growing at approximately 10 percent annually while generation capacity has not kept pace, making power supply the most immediate operational constraint on manufacturing expansion in the north. The problem came into sharp focus in 2023, when the northern provinces experienced significant electricity rationing during peak demand months, affecting industrial facilities including Samsung’s Bac Ninh complex.
The structural source of the problem is a combination of delayed infrastructure investment, the phase-out of certain hydropower capacity due to drought conditions in recent years, and the slow build-out of renewable energy. Vietnam has in abundance solar and wind potential but has struggled to translate it into installed capacity at the pace required. Vietnam’s revised Power Development Plan VIII, approved in 2023, sets ambitious targets for renewable energy expansion through 2030 but requires private capital mobilisation through power purchase agreements that have been structurally difficult to negotiate, partly due to regulatory uncertainty around foreign ownership of energy assets.
For multinationals making facility investment decisions in Vietnam, power reliability is now a first-order diligence item. Some have invested in on-site solar and battery backup infrastructure to manage the risk. Others have factored higher unplanned downtime into their Vietnam versus alternative location comparisons. The power constraint does not derail the Vietnam manufacturing thesis. The government is clearly committed to solving it, but it adds cost, complexity, and timeline uncertainty to the investment that the headline FDI numbers do not capture.
Industrial Land in Vietnam’s Primary Corridors Is Tightening
Vietnam’s manufacturing success is geographically concentrated in ways that create both a bottleneck and an opportunity cost. The two primary corridors (the northern industrial belt anchored by Hanoi, Bac Ninh, Hai Phong, and the surrounding provinces, and the southern belt anchored by Ho Chi Minh City, Binh Duong, and Dong Nai) contain the majority of export manufacturing capacity. Both corridors are showing signs of physical constraint. Industrial land prices in established parks in these zones have increased substantially, according to CBRE Vietnam’s research, and the pool of immediately development-ready industrial land with access to power, water, and road infrastructure is tightening.
The logical expansion would move manufacturing toward the central provinces and the secondary cities. Infrastructure in Da Nang, Quang Nam, and Binh Dinh has improved but has not yet reached the standard that large-format manufacturing requires in terms of port access, freight rail connectivity, and power grid reliability. The investment to close this infrastructure gap is happening, partly through government expenditure and partly through private industrial park development. This is a five-to-ten-year timeline, not a two-to-three-year one. Until that gap closes, the geographic constraints on Vietnam’s manufacturing expansion remain real.
Vietnam Lacks the Mid-Management Layer That Advanced Manufacturing Requires
The operational constraint that has emerged most consistently in conversations with investors and operators running Vietnam manufacturing businesses is the shortage of middle-management and technical talent at the layer above the production floor. Vietnam has demonstrated it can produce skilled production workers at scale. The labour force that makes Samsung’s Bac Ninh complex function is large, disciplined, and improves in productivity year on year. The missing piece is the engineers, production supervisors, quality managers, and supply chain coordinators who translate executive strategy into factory-floor execution.
This layer of talent is thin for structural reasons. Vietnamese universities have significantly expanded engineering enrolment but the quality of technical education varies widely and the connection between graduate output and the operational requirements of advanced manufacturing facilities is not consistently tight. The most capable technical talent in Vietnam is competed for intensely by the foreign multinationals already operating in the country, driving compensation inflation in this segment that is well above broader wage trends.
The World Bank’s Vietnam 2045 report identifies the skills gap at the technician and mid-management level as one of the principal constraints on Vietnam’s ability to move up the value chain from assembly and test into higher-margin manufacturing categories such as design, product engineering, and advanced component manufacturing. The companies that have invested most heavily in internal training programs (Samsung and Intel both operate training academies in Vietnam) have partially addressed this for their own operations. The broader ecosystem has not closed the gap at a speed that matches the demand growth.
The Ceiling Limits the Pace of Upgrade, Not the Direction of the Thesis
The ceiling is a ceiling on how fast Vietnam’s upgrade to higher-value manufacturing happens, not on whether it happens. The FDI will continue. The export trajectory will continue. The government’s willingness to invest in the infrastructure and policy conditions that support manufacturing (special economic zones, FTA negotiation, logistics investment) is genuine and consistent. Vietnam in 2026 is a materially more capable manufacturing location than Vietnam in 2016, and the trajectory continues upward.
The companies and investors who correctly read this are positioning accordingly. They’re staying committed to Vietnam for existing electronics and consumer goods manufacturing while being realistic about the five-to-ten-year timeline for Vietnam to develop the deep technical ecosystem that would make it competitive for semiconductor design, advanced materials, or pharmaceutical manufacturing.
The bull case on Vietnam has been right. The next phase of the bull case requires a more honest accounting of the constraints before it can be right again.
For the broader SEA growth divergence context (how Vietnam’s trajectory compares to Indonesia and the Philippines), see our SEA economic growth divergence analysis. For how the industrial real estate opportunity in Vietnam maps to investor access, see our industrial property in Malaysia and Vietnam piece.
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