Can Vietnam’s tech sector withstand US tariff shockwaves?

Vietnam’s technology sector has grown significantly, often capitalizing on trade tensions between the U.S. and China rather than being adversely affected, but this time it feels different, writes Dr Sam Goundar, a senior lecturer in IT, School of Science, Engineering & Technology, RMIT University Vietnam.

The latest shock comes from Washington’s announcement of steep, reciprocal tariffs, imposing a punishing 46% on many Vietnamese exports. Although President Trump has announced a 90-day delay in implementing the tariffs, the prevailing uncertainty is already causing widespread concern among businesses.

Vietnam has avoided direct confrontation, opting not to retaliate and instead removing tariffs on U.S. imports to maintain good relations. Yet even diplomacy has its limits, especially when global supply chains become collateral damage.

The critical question now is whether Vietnam’s thriving tech industry can absorb this unprecedented tariff shock or whether the damage could be deeper and longer lasting than expected.

A fragile supply chain under threat

According to Statista, in 2025, projected revenue for Vietnam’s semiconductors market is set to reach $21.45 billion. Vietnam’s semiconductor industry has rapidly evolved into a crucial global player, but the U.S. tariffs now pose a serious threat. With the addition of a 46% tariff to the price, Vietnamese semiconductors would not be competitive in the U.S. market.

The U.S. is Vietnam’s largest market for semiconductors. This is likely to force semiconductor manufacturing companies in Vietnam to rethink their production and export strategies. It will lead to potential instability in the supply chain, elevated costs associated with sourcing alternative markets or materials, and increased uncertainty for both investors and manufacturers.

Companies like Luxshare, a key Apple supplier, are considering shifting production to other countries, including the U.S., to mitigate tariff impacts. This could result in a reconfiguration of supply chains that currently include Vietnam.

Beyond semiconductors, there is the broader electronics export market such as phones, laptops, and consumer electronics, historically a powerhouse of Vietnam’s economy. It is now at risk as American buyers hesitate to absorb higher prices due to tariffs. There is an inherent risk that Vietnam will lose electronic market share to countries like India, Mexico, and Eastern Europe, which face lower tariffs.

Unlike other nations in Southeast Asia, Vietnam has developed a specialized role in the final assembly of high-end electronics. Prominent companies such as Foxconn, Samsung, LG Electronics, Intel, and Luxshare depend on Vietnam not only for labor but also for low-risk export channels.

The new U.S. tariffs challenge this model. While multinationals can shift production or absorb short-term losses, Vietnamese-owned SMEs that manufacture components or serve as subcontractors will likely shut down. The impact on factories, workers, and local economies could be immediate and significant.

Investment uncertainty and the road to resilience

The imposition of high tariffs creates an unpredictable economic environment, undermines Vietnam's appeal as an investment destination, and prompts foreign investors to exercise caution or seek more stable markets.

Already, tech giants based in Vietnam such as Foxconn, Samsung and LG Electronics are reconsidering or pausing new investments and expansion plans. According to Reuters, manufacturers are exploring relocation of operations to countries not affected by the tariffs, which could diminish Vietnam’s role as a tech manufacturing hub.

Foreign investors, who previously viewed Vietnam as a stable environment amid geopolitical uncertainties, may now reconsider their stance, potentially impacting the country’s technology sector. Vietnam is shifting from basic electronics assembly to high-precision, high-value component manufacturing, such as semiconductors, sensors, and AI hardware, which depends heavily on foreign investment in advanced infrastructure and precision technology. This opportunity might now be lost.

Vietnam’s heavy reliance on U.S. markets for tech exports has become a liability. Tech companies should strengthen ties with the EU, India, Japan, and ASEAN regions, where trade relations are stable and demand for electronics and semiconductors is growing. Diversification reduces exposure to geopolitical shocks.

To move up the value chain, Vietnam must transition from low-margin assembly to high-tech production. This means attracting capital for research and development, cleanroom facilities, and AI-chip fabrication so that Vietnam isn’t just assembling phones but inventing and designing the next generation of hardware.

Tech companies also need to adopt clear origin tracing, blockchain-based tracking, or local sourcing alternatives. This not only protects exports from punitive tariffs but also boosts Vietnam’s reputation for manufacturing independence.

Many companies can absorb tariff shocks by refining operational expenditures, leveraging AI, automation, and predictive analytics to streamline production, reduce waste, and maintain margins without cutting jobs.