In addition to India, Vietnam has become a viable option for U.S. firms looking to adopt a “China plus one” strategy, according to a survey by UK market research firm OnePoll.
Optimism in the Vietnamese market led to a surge in foreign direct investment last year compared with 2022. Government data shows that foreign direct investment (FDI) commitments in Vietnam reached $36.6 billion in 2023, up 32.1% year-on-year and representing the highest ever growth.
OnePoll found out that 61% of the surveyed 500 executive-level U.S. managers said they would pick India over China if both countries could manufacture the same materials, while 56% preferred India to serve their supply chain needs within the next five years over China.
The survey showed that 59% of the respondents found it “somewhat risky” or “very risky” to source materials from China, compared with 39% for India.
But Vietnam will not be able to achieve what India can, said Samir Kapadia, CEO of India Index and managing principal at Vogel Group, explaining that the world’s most populous country provides access to a vast customer base that Vietnam cannot match.
“Companies are not making these decisions for cost arbitrage. They’re making these decisions for cost savings and access to markets. You’re not going to see that same sort of benefit in just shifting to Vietnam,” he added.
Vietnam and the U.S. have double upgraded their relations to a comprehensive strategic partnership, fanning hope that more American corporations will come to Vietnam. During President Biden’s Hanoi visit last September, the two former war foes agreed to boost cooperation in critical industries such as high technology, semiconductors, and rare earths.
The U.S. has been Vietnam's largest export market for years.