Vietnam targets component localization to slash $60B electronics trade deficit
The government is shifting from a final-assembly model to high-value component manufacturing to reduce import reliance and secure the semiconductor chain.
Vietnam is overhauling its electronics sector to reduce a heavy reliance on imported components and capture more value from the global semiconductor chain. Deputy Prime Minister Phạm Gia Túc has directed ministries to address business recommendations aimed at strengthening domestic supply chains, signaling a strategic shift toward high-tech localization.
Despite explosive growth, the sector's financial balance remains precarious. In the first eight months of 2026, electronics exports—including computers, phones, and components—reached an estimated $101 billion, a 51% increase year-on-year. However, this growth was eclipsed by a surge in imports, which hit $161 billion, up 68%. This resulted in a trade deficit of approximately $60 billion for the period.
The Assembly Trap
Vietnam has successfully positioned itself as a global hub for electronics assembly, largely driven by foreign direct investment (FDI) shifts and the expansion of AI infrastructure. The country currently hosts over 170 foreign-invested semiconductor projects, though these are primarily concentrated in chip design, packaging, and testing.
While these investments have bolstered volume, the industry remains skewed toward final assembly rather than the manufacturing of high-value components. This structural imbalance leaves the nation vulnerable to external supply chain disruptions. Vietnam remains heavily dependent on imports from China—which accounts for about 4.7 percent of China's total trade—while relying on the U.S. as its primary export market.
Strategic Localization
To break this cycle, the government is prioritizing the implementation of the 2026-35 Supporting Industry Development Programme. The goal is to localize the production of critical inputs such as sensors, printed circuit boards (PCBs), and precision engineering components.
Moving from a "final assembly" model to "component manufacturing" is viewed as essential for Vietnam to secure a more strategic role in the global tech ecosystem. By producing these high-value parts domestically, the government aims to improve the national trade balance and insulate the economy from geopolitical realignments that could threaten the flow of imported tech inputs.
Government Commitment
Deputy Prime Minister Phạm Gia Túc emphasized the state's role in supporting this transition, stating, "Business success is Government success, while businesses’ difficulties are the responsibility of the Government, ministries, agencies and local authorities to address."
Observers will now watch for the specific incentives and regulatory changes introduced under the 2026-35 programme. The success of the strategy depends on whether Vietnam can attract the specialized technical expertise and capital required to move beyond assembly into the more complex realm of component fabrication.