Vietnamese Manufacturing Emerges as an Antidote for What’s Ailing China
Quick, name a consumer electronic product not made in China. Unless you named a pre-production prototype or an individual part, you are probably mistaken. Over the past dozen years, China has become the destination for low-cost contract manufacturing. These days we assume that even modest volume consumer electronic projects will wind up in China. MindTribe now provides Mandarin lessons to our engineers so our team can communicate better with our Chinese counterparts.
But just when we were getting comfortable with what to eat, where to stay, and how to move around places like Shanghai and Shenzhen – that is, to the extent one can get comfortable with things like thousand-year egg or breakfast squid, hotel porters who dress like matadors or gondola drivers, and van drivers who think the sidewalk is a car pool lane – China seems to be outgrowing its place in the global economic order.
Rapid growth in its Tier 1 & 2 cities is making China a victim of its own success. Wages are heating up faster than a scrub oak in the Santa Anas, and traffic is slugging through the streets slower than a Super-Size dose of trans fat in your arteries. The strength of the RMB has mainlanders snubbing even Hong Kong dollars, and has made ongoing investment increasingly expensive, compelling manufacturing jet setters to search for the next, next thing. (Check out “The Problem with Made in China,” The Economist)
Just as green is the new black (or was that gray or brown?), apparently Ho Chi Minh City (HCMC aka Saigon) is the new Guangzhou. Say goodbye to “Ni hao.” Say hello to “Xin chào.” For companies from Intel and Boeing to Jabil and Foxconn, Vietnam is becoming the new “it” destination for low cost manufacturing. And since you may find yourself on that 20-hour journey sooner than you thought, we put together some handy tidbits to get you there and back.
The Logistics
Convenience is decidedly not the motivating factor for moving production to Vietnam. While labor rates can be as much as 1/3 lower than China, the travel and shipping associated with Vietnam are typically more onerous. And although not as huge as the big Chinese cities, the big Vietnamese metropolises are also traffic nightmares. Andrew Zee, the director of Lunar Design in Hong Kong, has found that it can be just as cheap and a lot easier to go further inland from Shenzhen. He is seeing factory worker rates of about $100USD/month for operations in places like Dongguan, and this compares favorably to Vietnam and other less tapped venues.
But companies seek more than lower wages in Vietnam. They are seeking a way to diversify their production base to be less vulnerable to the uncertainty of China. Maybe we are starting to sense we’ve put too many thousand-year eggs in a single basket.
Hanoi and Ho Chi Minh City are the two main centers for international liaison. Here is an overview to get you started planning your trip.
Flights. First, say a prayer that your contract manufacturer is near Ho Chi Minh City not Hanoi. While Hanoi is being readied for connections to the US, it’s a pain getting there now. United serves Ho Chi Minh City (SGN) from San Francisco (SFO) via Hong Kong (HKG). (United SFO to SGN) Recall that it takes about 14.5 hours to get to Hong Kong from San Francisco. The HKG-SGN leg adds about 3 hours of flight time, plus the connection time, for total travel time over 20 hours. United serves Hanoi from LAX or Seattle, through Narita and/or Seoul, plus maybe another stop in Bangkok along the way, so in other words, if you are coming from Silicon Valley, the Hanoi flights appear to have more stops than the Greyhound to Bakersfield. Singapore Airlines is sort of the Green Tortoise option, serving either Hanoi or Ho Chi Minh City, with at least two-stops, one being in Singapore, and taking 2 days in most cases.
Currency. The currency in Vietnam is the “dong” (VND). At the time of this blog (November 2007), the exchange rate was:
1 US dollar = 16,245 Vietnamese Dong
A handy site for currency conversion is O and A.
Hotels. The rack rate seems a little over the top at $260USD at the Park Hyatt Saigon in the center of District 1, but it might be a good place to start to learn the lay of the land. The staff speaks English and the accommodations sound great, including a nice collection of contemporary art. However, one can find other international hotel chains at lower rates and even local hotels in a reasonable location for as little as $8USD, according to Yahoo! Travel .
Airport transfer. According to “To & From the Airport,” official fixed-price taxis from the international airport into the city center in Hanoi are $10USD and a 40-50 minute ride. You can purchase a voucher from stands at the terminal. In Ho Chi Minh City, the airport is about 4 miles northwest of the city center, and fixed price taxi tickets ($5USD) are available from a booth inside the terminal. Both locations have independent taxis that look as if they might cost less, but add hidden charges like tolls. Apparently overcharging is common among metered taxis. If your team is traveling together, you can reserve a van online that will meet your flight and costs around $30USD, depending on the service you choose.
Cargo. Shipping from Ho Chi Minh City to Long Beach costs more and takes longer than shipping from China. Estimates I received put the cost of moving a 40 foot container at about $400-600USD more than a box from Shanghai, and the elapsed time can be 5-10 days longer. (The quotes came from my former colleague Sanjay Saigal, who moves no freight himself, but like most overeducated mathematicians has an answer to everything.)
The Travel Diet
Food is cheap. You can eat for $1USD and splurge for under $30USD.
Water. Don’t drink the local water. Don’t get ice in your Vietnamese coffee. The water is not pure. It’s a third world infrastructure maintained by a Communist government. People here have learned to stomach more than you can.
Street food. In the major cities, food stalls are abundant. The methods of cooking tend to heat the foods enough to kill impurities. Consider it a reason to eat fried food and boiled noodles.
Coffee. Vietnamese coffee is very strong and sweetened with condensed milk or sugar. The coffee is brewed in a small metal pot that sits atop your cup. You lift off the pot when it is cooled enough to touch.
Restaurants. Ho Chi Minh City is blessed with an array of Vietnamese and international restaurants. Wikipedia makes the Chi Nghia sound like a place to try . It’s North Vietnamese style, clean, “nicely decorated,” with a chef who worked for Sofitel for 25 years, and entrees from $2USD-$5USD. That sounds like a move up from the ostrich farm outside Foxconn City in South China.
Bars and entertainment. Yes, lots. There is a place called the Underground that gets written up frequently, but one thing on its menu is a chicken burrito. Hmm. I have learned not to eat Mexican food outside of Mexico, California and Texas. A Vietnamese burrito might be kind of like a Portland burrito. Gag.
The Language
Before we go, now is an opportune time to get down some basic Vietnamese language. Richard Dinh, a product designer at Apple, who openly acknowledges that he’s never been to Vietnam but who must have the right relations, helped out with a cue card of handy phrases. Here’s your chance to be the first in your studio to massacre the intonations.
Front of Handy Card
Back of Handy Card
An English-Vietnamese dictionary www.vdict.com offers an online resource for mediocre translation, but even better is the forum it provides that points out idiosyncrasies between the languages. I love its chatter about “Yes” and “No” and how translation of the correct answer depends upon how the question is asked.
Here’s an example:
If the issue seems foggy, consider a simpler question: “Do you want to get lunch?” or, alternatively, “don’t you want to get lunch?” In English, “yes” means you want lunch regardless of how the question is asked. In Vietnamese, “yes” to the latter question would mean “I don’t want lunch.”
So, in learning the Vietnamese language, it is not only the words and intonation that matter. We need to start thinking about how we ask the question.
With that in mind, don’t you think we should try manufacturing Vietnam?
I visited your website after an all-too-brief visit with our nephew – and your co-worker – Eric in April, and was intrigued by this article.
The intricacies of communication can be tricky in any language, not just Vietnamese. The negatively-prefixed “Don’t you want…” form of question is always open to some mis-interpretation, and I normally would try to reply in a way that removes the ambiguity. “Don’t you want to get lunch?” would be answered by “I’m skipping lunch today” or “I only have time for a sandwich”, rather than a simple “Yes” or “No”.
If I were the questioner – and especially if some major business deal or financial decision hung on the correct reply – I would try to seek further clarification to ensure that I understood the situation. If “Don’t you want me to plate that part” resulted in a “No” answer, follow up with “The part will not be plated – is that correct?”
Hello…. i was searching for vietnam hotel and i came across your post and it is definitely the most sensible thing i have seen in a long time, and in my opinion you got something good going here, i have to get my friends to subscribe to your post about Good Morning, Vietnam!.
hello my name is lina i really want to buy dictionary english vietnam where do you sell it ?
Hi Lina:
We don’t sell a dictionary since most of our team speakz engineer, not English or Vietnamese, but you might try http://www.VDict.com. It’s free, and I used it somewhat for the blog. With the site book marked on your Treo or iPhone, you’d have a handly little portable dictionary.
Lori H.