Multinational technology groups are restructuring their production strategies, giving Vietnam a reason to hope that it would be their next destination. But Myanmar and Indonesia, which also have low labour costs, are scrambling to attract the same investors as well.
According to PingWest, a technology news website, Microsoft is continuing to restructure and will shut down a factory in China, and dismiss tens of thousands of workers in Guangdong province.
Most of them work at mobilephone assembling factories of Nokia, which was recently taken over by Microsoft.
The move will occur before the Chinese 2015 Lunar New Year holiday.
The decision to shut down the factory in Guangdong is attributed to higher labor costs in China and Microsoft’s production re-positioning strategy.
The decision is bad news for Chinese workers, but good for other countries, including Vietnam, which now has every reason to invite the technology giant.
An official of the Ministry of Industry and Trade (MOIT) noted that Vietnam’s cheap labor costs are a big draw for high-technology groups.
A report by the Japan External Trade Organization (Jetro) showed that employers only have to pay $145 a month to workers in Hanoi, which is two to three times lower than the average pay to workers in Guangzhou or Shenzhen.
The success of Intel, another technology giant, in Vietnam, would also be a reason for Microsoft and others to consider coming to Vietnam.
At first, Intel intended to invest $300 million in a project on assembling and testing microchips in Vietnam but later decided to raise investment capital to $1 billion.
In late 2014, Intel Vietnam reportedly succeeded in making microprocessors for personal computers with products named Haswell. With the achievement, Intel has become a new major production base of Intel, which will provide 80 percent of Haswell microprocessors to Intel’s global market.
The official said Intel’s success in Vietnam shows that the Vietnamese labor force is quite capable of satisfying the strict requirements set by the world’s leading technology groups.
However, an analyst warned that Vietnam will have to struggle with some formidable rivals to “catch Microsoft’s eyes”.
The US technology giant is reportedly now considering two countries in Africa, Mexico and Brazil, and Indonesia and Myanmar in South East Asia for its new production bases.
The labor costs are reportedly also very competitive in Indonesia with the workers’ average pay at $1,163 per annum, two times lower than in China.
Meanwhile, Myanmar in 2014 alone attracted $7 billion worth of foreign direct investment.