Procurement: High tech finds Vietnam attractive

Editor’s Note: This if the second of a three-part article written by Mi Nguyen, Seafreight Pricing Specialist - North America region for Kuehne + Nagel.

While some multinationals are reluctant to relocate production to Vietnam, management’s active involvement and constant drive for quality improvement is the key to successful offshore sourcing there.

The world’s largest chip maker, Intel, opened its massive $1 billion chip testing and assembly facility in Saigon Hi-tech Park in Ho Chi Minh city in October last year. The factory tests chips for defects and places them inside protective packaging.

“Assembly and test is a critical final step in the end-to-end manufacturing of Intel’s silicon products,” said Rick Howarth, general manager of Intel Products Vietnam Co., Ltd. “We were attracted to Vietnam by a vibrant, skilled workforce with strong potential to increase the complexity and value-add of their contribution to Intel’s global business.”

The Vietnam government’s support for the Intel’s business activities in the country in the past four years was also an important factor leading to the company’s decision to place the facility in Vietnam.

Intel was also impressed by Vietnam’s investment in infrastructure. In the past two years, after the completion of Cai Mep terminal, the first deep-water port which can accommodate mega-sized vessels in Vietnam.

Several carriers have started direct service from this port, which is located about 30 miles from Ho Chi Minh City –Vietnam’s largest economic hub – to Los Angeles. The establishment of direct services from Vietnam has been accelerating to meet the increasing shipping demand as producers of goods for export to the United States have been moving production from China to Vietnam to take advantage of its low-cost labor force, carriers said.

In May last year, Maersk Line announced its kick-off of a direct, all water service from Ho Chi Minh city’s terminals to the U.S. West Coast with transit time of 18 days. This new service made Maersk Line the first carrier to introduce service on post-Panamax-sized ships to Vietnam. The vessels can carry up to 9,000 20-foot equivalent units.

Before Maersk, Hanjin, Hapag-Lloyd, NYK and OOCL also announced weekly sailing, direct call at Vietnam’s Cai Mep deepwater port to their South China Sea Japan Express to the U.S. West Coast also starting in May 2010.

And cost reduction is a significant statistic. Accord to analysts for Freight Market, port-to-port freight cost from Ho Chi Minh City to the U.S West Coast is 10 percent less expensive that similar movements from Shanghai.

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