Imagine you’re going out to dinner with your extended family. You have your kids, spouse, parents, grandparents – everyone who shares your last name (and also those who don’t).

The question is, which restaurant will you choose?

  • Choice 1: A reputed hotel chain with a set menu that you have no problems with. It was your go-to place back in the day, but lately, its costs have risen, service hasn’t gotten any better, they sometimes listen in to your conversations and steal your plans, and to top it off, the host has become increasingly rude towards your family.
  • Choice 2: A small but rapidly growing organic restaurant with a diverse menu. It has specialty chefs and its own world-wide sourcing network, that allows you to sample expertly prepared dishes from across the region at a lower cost. Oh and yes, they are part of a variety of tariff-free sharing agreements with all your friends.

It’s a lame comparison, but for the sake of it, let’s do it.

If you like Choice 1, you’ll probably stick to Chinese suppliers for the foreseeable future.

If it’s Choice 2, you must be looking to diversify your supply chain outside of China.

While it’s been some time since the ‘China plus One’ movement started, the early signs appear promising for Vietnam to be a major beneficiary. Let’s understand what makes it a frontrunner and how its competitors are placed.

China vs Vietnam: A David and Goliath story

Over-reliance of global supply chains on China was already beginning to ruffle some feathers. But it wasn’t until the US-China trade war, spurred by former US President Donald Trump, that serious talk about a “China plus one” strategy started to emerge.

The heightened mistrust between China and the West, together with China’s zero-COVID policy (relaxed in early 2023), posed further challenges to supply chains. Companies now are pursuing supply chain diversification, with Vietnam being one of the most notable beneficiaries. In 2022, the total FDI registered in Vietnam reached $27.72 billion, a 13.5% increase from the previous year.


Know About Advantage Vietnam as a Supplier in the World

+1 (480) 559-9384

Zetwerk provides high-quality Precision Components and all secondary operations.

Submit the relevant part drawings, 3D files, and other information by clicking on the button below.

Get a Quote

Many companies are slowly adjusting their global supply chains, shifting some of their production lines to Vietnam. The country of over 100 million people has attracted an influx of new foreign investments in recent years. It can be considered a late-blooming example of the Asian Tigers.

10 years ago, the country was a destination for investment in textiles, garments, and metal processing. Now, everybody talks about investments in electronics, automobile supply, and high- tech industries.

For instance, Apple announced plans to test the production of its smartwatch and MacBook in Vietnam. Google moved its smartphone production here from Southern China. Lego is investing more than $1 billion to build a new factory. And Lenovo, Komatsu, Nintendo, and Sharp are expanding their manufacturing presence in the country.

Why Vietnam?

Vietnam has become a prime destination for international investment, particularly in labor-intensive manufacturing. This is due to a unique combination of key advantages. These include relatively low labor costs, suitable infrastructure for exports, and a strategic location on major trade routes. Additionally, government measures—both at the national or provincial level—like corporate income tax breaks for high-tech companies and designated industrial zones, have also contributed to this appeal.

Vietnam has seen steady growth in labor productivity in the past decade. And Vietnam continues to be an attractive location for supply chain diversification. Its status is supported by the trade benefits that the government has established in recent years: besides being a member of the World Trade Organization and Association of Southeast Asian Nations.

Vietnam has entered into 15 free trade agreements with partners across all continents, including strategically important partnerships such as the EU–Vietnam Free Trade Agreement and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, all favoring lower trade tariffs to boost trade value. As a result of this, Vietnam has been able to capture a massive pie of international trade, compared with India or Mexico, which have very few such FTAs in place.

Why Has Vietnam Captured the Maximum Value?

According to a recent survey of the American Chamber of Commerce, in South China, 219 manufacturing companies responded with a possible move out of China but not to the US. 64% of US manufacturers in China are looking to move to South East Asia as well, with Vietnam at the top of the list.

Vietnam is a close neighbour of both China and India is on high energy recruitment for US manufacturers still looking for a more advantageous production environment. Vietnam has continued to keep its labor costs down despite its fast GDP rise. With a population of over 2 million and a deep-water port Haiphong, Vietnam has become a highly successful manufacturing port boasting of economic growth of 17% last year more than any other country.

Beyond the obvious benefits of helping to increase trade with other countries and making it a more attractive investment destination for exporters and importers, there are several strategic benefits to Vietnam’s development as well.

Free trade agreements will enable Vietnam’s economic development to continue to shift away from exporting low-tech manufacturing products and primary goods to more complex high-tech goods like electronics, machinery, vehicles, and medical devices.

The Advantage Vietnam can be seen in 4 stages:

  1. By diversifying trade networks and sourcing cheaper imports, countries can boost export competitiveness. Recent deals like the RCEP and EVFTA allow Vietnam to benefit from reduced tariffs and attract exporters.
  2. Partnering with foreign firms for knowledge and tech transfer helps transition into higher value-added production. For example, Vinfast, a Vietnamese conglomerate, collaborates with global MNCs to manufacture e-car components, enhancing labor productivity and export capacity.
  3. Trade deals align Vietnam with standards from employee rights to environmental protection. Both the CPTPP and EVFTA require adherence to International Labor Organization standards, modernizing Vietnam’s labor laws.
  4. These standards ensure product quality, manufacturing, and employee rights, positioning Vietnam as a manufacturing and exporting hub.

Near peer Competitors

Exports from China to the US have contracted in the past five years. Major emerging markets like Mexico (+$111 billion), Vietnam (+ $78 billion), and India (+ $31 billion) have increased their exports to the US. The increase in the export of these countries to the US can be attributed to both trade creation as well as trade diversion signaling a potential decoupling in global trade, says CareEdge Ratings in a recent report.

The report suggests that computers and electronics exports from Vietnam, India, and Taiwan to the US witnessed the steepest growth during this period with Compound Annual Growth Rates (CAGR) of 42%, 38%, and 27%, respectively over the past five years. However, India’s electronics exports to the US were substantially smaller in value terms, amounting to just $ 2.9 billion compared to Vietnam’s $35 billion.

Similar to Vietnam, other Asian countries like Taiwan, Malaysia, Thailand, South Korea and Japan already have a larger footprint in the US in terms of electronics export. However, even with a slow start, India stands to benefit from the trade diversions emerging from the decoupling of the US and Chinese economies.

  • India

The current export value of computers and electronics products from India to the US mirrors Vietnam’s 2013 export of the same items to the US. Vietnam’s electronics exports to the US gained momentum after 2008, following the implementation of the US-Vietnam Trade and Investment Framework and Agreement (TIFA). Conversely, India’s surge in electronics exports to the US started to gather momentum post-2018.

India’s infrastructure and quality assurance issues along with an increased delivery timetable are major obstacles to solidifying confidence with major North American manufacturers. Inadequate roads, electricity, water, and transportation along with unavailable off-the-shelf and needed plant and production line parts impose additional costs and production delays therefore inconsistent delivery. Those who can afford to maintain backup parts can reduce maintenance costs and delays.

India’s archaic internal licensing and approval process is another deterrent. Manufacturers have reported that just building a commercial plant and gaining a license for the use of electricity for commercial means may take as much as a year.

  • Mexico

Although Mexico has about 40% higher labor costs, it may prove more advantageous to some US manufacturers due to its location and friendly cooperation with the US. Speed to market as well as less risk may be just the ticket after all.

Taking advantage of China’s plight with the US, Mexico is continuing to build free tariff trade agreements with over 50 countries in Europe, South America, and Africa. Typically manufacturing in Mexico is a cost reduction of approximately 50% over the US but much more than South East Asia labor.

The proximity reduces shipment costs, product losses, and improves customer satisfaction. Mexico is beginning to look much more attractive already having a successful infrastructure, reduced labor costs, less unrest, and above all free tariffs.

Protection of a manufacturer’s Intellectual Property (IP) is guaranteed under the recent United States-Canada-Mexico Agreement (USCMA) which is a major point of contention between the US and China. China’s ZTE, accused of IP theft, paid $1 billion in fines and another $500 million in escrow as a safeguard against possible future bad behavior for US IP theft.


After so many years of “Made in China” stamped on a majority of products in your home, “Made in India”, “Made in Vietnam” and “Made in Mexico” may take its place. But, if the current trends are anything to go by, Vietnam is set to emerge as the frontrunner.

About Zetwerk

Zetwerk works with original equipment manufacturers in North America and worldwide, fulfilling their manufacturing requirements for customized components and assemblies. We act as a second brain to the OEMs. Our team of experts not just executes the customer’s manufacturing strategy, but adds tangible value at every step of the process, right from vetting designs to finding and managing the suppliers to quality control and logistics. Our customers regard us highly for our transparent and hands-on approach to manufacturing.

Zetwerk executes these projects through its network of partner suppliers spread across the USA, India, China, Vietnam, Mexico, Taiwan, South Korea, and still expanding. These world-class facilities provide practically unlimited production processes, capacities, materials, part sizes, and weights as well as secondary operations, surface finishing, assembly, and related services. Importantly, we have our teams established in all these countries with a particularly large presence in the US.

Zetwerk recently acquired Unimacts, a US-based manufacturing services company, providing further impetus to our commitment to serve North America as a primary market. We have more than 2,000 customers across North America, Asia-Pacific and the Middle East, and a network of more than 10,000 manufacturing partners worldwide. Founded in 2018, we are backed by some of the world’s leading venture capital firms including Sequoia, Kae Capital, Accel Partners, Lightspeed, and GreenOaks. As of 2023, Zetwerk was valued at US$ 2.8 Bn.

Our manufacturing facilities employ the latest techniques and maintain all relevant certifications to ensure the highest quality control for our customers as well as compliance with all regulatory requirements, and legal practices. You can view our certifications here.

To know more about how we function, check this.

If you are looking for a global sourcing partner, look no further.

Get a Quote