In mid-April, a Chinese enterprise inspection team of over 100 people came to the gloomy Bac Ninh Province in northern Vietnam. The last round of intensive visits by such large inspection groups was three years ago. After China’s epidemic policy adjustments, the peak period came again.

In this 100-person inspection group, there are those who make films, molds, die-cutting, chemical raw materials, factory floors, dust-free workshops, and labor dispatch. Most companies are concentrated in Shenzhen, Dongguan.

Bac Ninh Province is a must-visit province for the Chinese delegation. It is located in the agriculturally rich Red River Delta region in northern Vietnam. It is the smallest province in Vietnam and the place with the highest population density. Its proximity to China, dense population, and preferential policies make Bac Ninh an important destination for Chinese factories moving south.

In the past few years, Bac Ninh Province has implemented a "one window" policy for foreign investors, helping foreign investors to handle investment procedures in a timely manner and minimizing the approval time. Bac Ninh Industrial Zone has attracted many foreign companies. Foxconn, the largest assembly supplier in Apple's supply chain, has its Vietnam production base here.

A head of a Chinese-funded enterprise based in Beining told "Financial Eleven" that this was the first time he had seen so many Chinese people in Beining, and the Chinese restaurant was overcrowded. Local Chinese-funded companies do not have such large conference rooms, so they can only receive guests in batches or free up employee restaurants.

For Beining, the arrival of waves of Chinese people is a new opportunity. However, the person in charge of the above-mentioned Chinese enterprise observed that the attitude of Chinese enterprises towards investment in Vietnam is hot on the outside but cold on the inside. “There are many people clamoring to come out, but few actually take action.”

Despite the excitement, he was still hesitant.

Xu Jin, the head of overseas business of an Apple supply chain manufacturer, came to Vietnam for the first time with the inspection team. On this day, he walked out of the roaring electronics factory and smoked a cigarette hastily at the door. Behind him, young female workers wearing long braids and slippers folded their hands while talking, and packed up a finished product in a hurry. There was a slight odor in the air and dust was floating in the air.

"At least half of the production lines are shut down." Xu Jin saw something fishy. He stamped out his cigarette butts and said, "It's hard to live a good life."

Xu Jin recently went to the United States. The person in charge of the customer who contacted Apple clearly told him that his company must set up a factory in Vietnam or India within a certain period of time. The production capacity scale is not required, but it must be there.

Chinese companies have followed Apple's global production strategy and moved to Southeast Asian countries such as Vietnam, which dates back to five years ago. Vietnam is recognized as the most suitable country in Southeast Asia for building factories. Advantages that can be blurted out include: abundant labor and low cost. But in the past three years, Vietnam's halo has been fading.

In the first quarter of this year, Vietnam's GDP (gross domestic product) increased by 3.32% year-on-year to US$97.42 billion, a significant slowdown from last year's 8.02% growth rate; exports fell by 11.9% year-on-year, of which smartphone shipments fell by 15% year-on-year, and electronics shipments fell by 15% year-on-year. Product shipments fell 10.9% year-on-year.

The global consumer electronics industry has been in a downturn for more than three years. According to data from market research firm IDC, in the first quarter of 2023, global shipments of smartphones, PCs, and tablets fell by 14.6%, 29%, and 19.1% respectively year-on-year.

Apple, considered the most resilient, is also struggling. In the second quarter report of fiscal year 2023 (for the first quarter of 2023), Apple's revenue fell 2.5% year-on-year to US$94.84 billion, and its net profit fell 3.4% year-on-year to US$24.16 billion. It has declined for two consecutive quarters. That doesn't bode well for the thousands of companies in Apple's supply chain. Among the already insufficient orders, more are flying to Vietnam and India, but fewer are flying to China.

An electronics factory owner in the inspection team complained about various inconveniences in Vietnam at the dinner table, such as inadequate infrastructure, incomplete supporting facilities, and high land prices. Someone responded, "But there's an order here."

After a moment of silence, he continued: "If you don't move, you are waiting for death. If you come out, there may be a glimmer of hope."

The transfer of Chinese factories to Vietnam can be roughly divided into three stages: after 2010, the transfer of Chinese industries undertaken by Vietnam was mainly labor-intensive industries such as shoes and clothing, mainly due to considerations of cost factors such as labor and land prices; in 2019, China-U.S. Since the trade friction, the United States has imposed successive rounds of tariffs on Chinese imported products, with the electronics industry being the focus. This has triggered a second wave of transfers, mainly electronics companies exporting to the United States; now, the supply chain strategies of foreign-funded companies are accelerating from The shift from "all in China" to "China + N", represented by Apple, has become a new trend.

The fruit chain is a supply chain with apples as its core. In China, there are more than 150 suppliers and 259 factories in the fruit chain, distributed in Henan, Guangdong, Jiangsu, Zhejiang, Hubei, Sichuan, Chongqing and other places. These suppliers and their suppliers have migrated from China to Southeast Asia and South Asia, and invisible threads have gathered into a huge network.

In the first quarter of this year, investment by Korean companies in Vietnam dropped sharply by 70.4% to US$474 million. Korean capital is withdrawing, but Chinese capital has to enter. In order to win orders from the US market, production in Vietnam is a must, even if the production cost in Vietnam is higher than in China.

But for fruit chain companies, going to Vietnam is no longer an option, but no choice. However, members of the inspection team believe that Vietnam's policy dividend period will be at most three to five years away.

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