More FIEs moving research and development to Vietnam

Japanese precision motor-maker Nidec Corporation is the latest on the list to consider moving some functions with higher intellectual components to Vietnam.

At the meeting with Chairman of the Ho Chi Minh City People’s Committee, Nguyen Thanh Phong on August 1, Go Watanabe, first senior vice president of Nidec, said that the company is moving some of its R&D activities to Saigon Hi-Tech Park (SHTP).

According to Watanabe, apart from raising the capacity of the Nidec Sankyo project, one of its projects at the park, the company is going to establish an R&D centre here that would work on increasing the efficiency of the products that the company is manufacturing in Ho Chi Minh City. “With this plan the company shows interest in developing local human resources,” said Watanabe.

Chairman Phong said he supported the plan to increase investment, and especially the plan for the R&D centre. He said that Ho Chi Minh City has many universities offering quality engineering courses and providing ample human resources for the centre.

Nidec currently has five projects with a total investment capital of $380 million in SHTP, supplying precision machinery to electronics producers. It accounts for 50 per cent of the total 24,000 workers in the park, most of whom are basic manual workers with low wage.

Besides Nidec, a host of other foreign companies have been expanding R&D activities in Vietnam. In March, Samsung received the certificate of investment for an R&D centre in Hanoi. The centre, with a total investment of $300 million, is going to start operation in 2020, with 4,000 employees. It will be the biggest of its kind in Vietnam.

The project adds to R&D activities in Vietnam. In 2012, the South Korean company opened Samsung Vietnam Mobile R&D Center (SVMC), the biggest Mobile Research and Development Centre of Samsung in Southeast Asia, with 1,400 engineers working on software for mobile devices and LTE networks.

Bosch Vietnam, a subsidiary of German Robert Bosch GmbH, established Automotive R&D center in Ho Chi Minh City in 2014, following up its Software and Engineering R&D Center established in 2010, where it employs 900 people and targets to raise this number to 1,100 at the end of this year. Vietnam has become the destination for many big manufacturers of technology products. Besides moving R&D closer to where manufacturing happens, the tendency is cost-effective.

Japanese semiconductor manufacturer Renesas Electronics Corporation has recently begun to relocate development activities overseas, employing about 600 researchers in Vietnam. “Development costs are becoming even more important to us than manufacturing costs,” CEO Bunsei Kure said in a recent interview with Bloomberg. “It is just not possible to secure enough engineers domestically.”

In order to encourage investment into high-technology, the Vietnamese government provides tax incentives to companies crossing a certain threshold in R&D expenditure (as a ratio of total revenue) and R&D headcount (as a ratio of total headcount).

The Vietnamese government earlier agreed to waive Samsung’s rental fees for 50 years for the land plot where its $300 million upcoming R&D centre is located, altogether a sum of $14 million.