[Focus on Southeast Asia] The power outage in Vietnam has affected many companies in the electronics industry chain

The wave of power outages in Vietnam affects tens of thousands of enterprises, and the transfer of the industrial chain cannot support it?

In recent days, Vietnam has been hit by extreme heat in summer, power consumption has increased sharply, and the power system has been unable to bear the load. The northern industrial areas in Vietnam were forced to cut off power in different areas. It impacted the electronic information industry in northern Vietnam, affecting more than 11,000 companies.

This wave of blackouts has exposed the fragility of Vietnam's power system, and it also shows that Vietnam's ability to undertake the transfer of industrial chains is limited and overloaded. If Vietnam does not solve the power supply problem and further improve its infrastructure, the transfer of industries to Southeast Asia may slow down. This also shows that China still has an irreplaceable position in the global manufacturing industry.

Climatologist and weather historian Maximiliano Herrera said the Asian heatwave could be the worst tropical heatwave in world climate history in terms of temperature intensity, geographic distribution and duration. Vietnamese Prime Minister Pham Minh Chinh also recently warned that 100 million residents could face nationwide power outages amid record temperatures and unprecedented power demand.

Vietnam's economic growth slowed to 3.3 percent in the first quarter of this year from 5.9 percent in the fourth quarter of last year due to the threat of power outages. Meanwhile, Vietnam has been turning off streetlights and manufacturers are shifting operations to off-peak hours to keep the country's electricity system functioning, with more than 11,000 companies agreeing to conserve electricity.

Power consumption has soared due to the high temperature, the number one cause of the current blackout in northern Vietnam. In May, Vietnam's national average electricity consumption was close to 820 million kWh/day, an increase of more than 20% compared to April. Among them, Hanoi's electricity consumption soared in May and early June, and many areas have experienced continuous power outages in the past few days.

In recent years, global geopolitical conflicts and the shift of industrial chains to Southeast Asia have made Vietnam a hot spot for investment. According to statistics, as of October 20, 2022, Vietnam's foreign investors have increased registered capital, adjusted capital contributions and purchased capital contributions totaling more than 22.46 billion US dollars, an increase of 94.6% over the same period in 2021, and an increase of 9.9 percentage points in the first nine months. A large number of Korean, Chinese Taiwan, Japanese and some American companies have invested and set up factories in Vietnam.

These investors value Vietnam's good geographical location, good investment policies, low-cost high-quality labor and excellent import and export conditions. Vietnam is located in Southeast Asia and borders China. It is convenient to use China's complete supply chain resources to promote the development of the local electronic information industry, and has formed a relatively complete local industrial package.

In terms of foreign trade policy, Vietnam also holds a very open attitude. In the past 20 years, Vietnam has been one of the countries that have signed the most regional trade agreements in the world, and has signed 16 free trade agreements with the United States, China, India, Japan, South Korea and other countries. At the same time, Vietnam is the first emerging market country among the Asia-Pacific countries to establish a free trade relationship with the EU, and it is also the second ASEAN country to establish a free trade relationship with the EU after Singapore.

Up to now, there are still enterprises pouring into Vietnam to invest and set up factories, but Vietnam has limited land and infrastructure can no longer keep up with the needs of industrial development, and the phenomenon of "overloading" has appeared. Some investors have to choose Thailand and other neighboring countries of Vietnam as investment destinations. If Vietnam does not continue to improve infrastructure, increase power, and provide more land to set up factories, Vietnam may not be able to undertake more industrial chain transfers. (Source: Jiweiwang)