China Plus One: How Vietnam Became the World’s Factory Backup Plan

Vietnam did not win the China Plus One race by being the best location; it won by being the least disruptive one. A multinational moving a line out of Guangdong wanted the same suppliers, the same logistics, the same management culture and a lower cost, and Vietnam offered all four within a truck ride of the Chinese border. This article follows the money from the first trade-war relocations in 2018 through the 2025 tariff shock, explains what actually moved and what did not, and sets out what the model means for investors, operators and the Vietnamese state that built it. It is part of the Vietnam Company Stories hub.

Why did multinationals choose Vietnam as the “plus one” rather than India or Mexico?

Because Vietnam was the option that required the least change. The northern provinces of Bắc Ninh, Bắc Giang, Thái Nguyên and Hải Phòng sit a few hours by road from Guangxi and Guangdong, so a Chinese supplier could feed a Vietnamese plant on the same trucks it already ran, without redesigning a supply chain.

Cost was the second reason but not the first. Assembly wages in the northern electronics belt were on the order of a third of coastal China’s by the early 2020s, land in a licensed industrial park could be secured on a fifty-year lease, and corporate income tax holidays of up to four years at zero and nine at half rate were standard for large projects. India offered lower wages still, but a Chinese contract manufacturer moving to Tamil Nadu had to rebuild its supplier base from scratch, and Mexico offered proximity to the United States but a workforce and security environment Taiwanese electronics firms found harder to manage.

The third reason was political. Vietnam is a one-party state that had already proved, with Samsung from 2008 onward, that it could deliver a licence, a power connection and a trained workforce for a multi-billion-dollar plant on a timetable. The story of how one Korean company came to account for roughly a fifth of national exports is told in the Samsung Vietnam profile; for the firms that followed, Samsung was the proof that the system worked.

Finally, Vietnam had signed trade agreements China had not. Membership of the CPTPP from 2019 and the EU agreement from 2020 meant that a factory in Vietnam could ship to Japan, Canada and the European Union at zero or falling tariffs. The same Chinese-owned plant relocated fifty kilometres across the border changed its tariff treatment in most of the world’s rich markets.

What happened when the first US-China tariffs hit in 2018?

The first wave was Chinese and Taiwanese contract manufacturers, not Western brands. Within eighteen months of the 2018 Section 301 tariffs, GoerTek, Luxshare, Pegatron, Foxconn and dozens of smaller suppliers had announced or expanded plants in Bắc Ninh, Bắc Giang and Nghệ An, most of them to serve Apple and other American customers.

The pattern is visible in the FDI registration data. Investment from mainland China and Hong Kong, which had been a modest presence dominated by textiles and furniture, became one of the top sources by 2019 and, by project count, the largest by 2023. Much of it was not new capital but relocated capacity: a supplier that had made a product in Dongguan for a US buyer set up the final stage of production in Vietnam so the goods could be shipped with a Vietnamese origin.

Apple was the bellwether. The company began moving AirPods assembly to Vietnam in 2019, then Apple Watch, MacBook and iPad lines from 2022, and by 2025 its supplier list showed more than thirty facilities in the country. The mechanics of that shift, the plants involved and what each one actually does, are covered in the Apple’s Vietnam Shift piece. The relevant point here is that the decision to move was made in Cupertino and Shenzhen, and Vietnam’s role was to say yes quickly.

The 2020 to 2022 pandemic period then accelerated everything. China’s lockdowns, and the closure of Zhengzhou’s iPhone campus in late 2022, turned a tariff hedge into a resilience argument that boards could not ignore. Vietnam had its own severe lockdown in Ho Chi Minh City in the third quarter of 2021, which briefly halted Nike’s and Adidas’s biggest supplier plants, but the northern electronics belt kept running and the relocation continued.

How much of Vietnam’s export boom is really Chinese?

A large share, and that is the uncomfortable centre of the story. Vietnam’s imports from China rose to roughly $140 billion in 2024, its exports to the United States rose to roughly $120 to 135 billion, and the two numbers move together because the second is largely assembled from the first.

The mechanism is not fraud, in most cases. A phone or a pair of trainers made in a Vietnamese plant is genuinely made there in the sense that customs law recognises: the last substantial transformation happens in Vietnam. But the screen, the battery cells, the printed circuit boards, the synthetic fabric and the soles usually arrive from China. Academic estimates of the Chinese value-added share in Vietnam’s exports to the United States vary widely by product, from small in garments sewn from regional cloth to very high in some electronics and solar modules.

This has two consequences. Vietnam records a large surplus with the United States and a large deficit with China, which is what a pass-through assembly economy looks like on paper, and Washington increasingly treats the surplus as evidence that the country is a conduit. That argument came to a head in 2025 and is the subject of the sibling article on the tariff shock and the 2025 trade deal; the technical question of what counts as transshipment is taken apart in Made in Vietnam?.

The second consequence is that the domestic supplier base has grown far more slowly than the export figures suggest. Samsung, after more than fifteen years, counts a few hundred Vietnamese tier-one and tier-two suppliers, most of them making packaging, plastic parts and simple metal components. The precision work still belongs to Korean, Japanese, Taiwanese and Chinese firms operating inside Vietnam.

Who are the companies that actually built the “factory backup plan”?

A short list of very large firms and a long tail of their suppliers. Samsung, with something over $22 billion invested across Bắc Ninh, Thái Nguyên and Ho Chi Minh City, remains the anchor. Foxconn, Luxshare, GoerTek and Pegatron built the Apple belt. Intel, Amkor and Hana Micron form the chip packaging cluster. Lego, Nike’s and Adidas’s contractors, and a wave of furniture and solar firms fill in the rest.

The names that matter changed over time. In the 2000s the arrivals were Japanese, Canon and Honda among them, and Taiwanese footwear groups such as Pou Chen. In the 2010s they were Korean: Samsung, LG and their hundreds of suppliers. From 2018 the largest new commitments came from Chinese and Taiwanese electronics contractors and, from 2022, from firms making a deliberate resilience bet. Lego’s $1 billion factory in Bình Dương, which began production in early 2025, is the clearest example: a European toymaker choosing Vietnam over an expansion in China, with a solar-powered plant designed to show Western customers that the shift was principled as well as cheap.

The chip cluster is the most strategically interesting. Intel’s assembly and test site in Saigon Hi-Tech Park, profiled in Intel Saigon, has been running since 2010; Amkor opened a $1.6 billion packaging plant in Bắc Ninh in 2023 and has since expanded it; Hana Micron built in Bắc Giang. None of these fabricate wafers, and Vietnam has no realistic prospect of a leading-edge fab this decade, but back-end semiconductor work is exactly the labour-intensive, capital-moderate stage that China Plus One is designed to relocate.

The infrastructure behind these firms is a business in its own right. The industrial-park developers, Becamex, VSIP, Kinh Bắc and their peers, are the people who assemble land, lay roads and power, and sell the resulting plots to the multinationals; how that trade works is the subject of Industrial Parks Inc.. Without them, the relocation would have taken twice as long.

How did the Vietnamese state manage the inflow?

By centralising the sales pitch and decentralising the delivery. The Ministry of Planning and Investment, merged into the Ministry of Finance in 2025, set the incentive framework; provincial People’s Committees competed for projects; and the Party leadership intervened personally when a very large investor needed a problem solved.

The incentive framework was generous by regional standards until 2024, when the OECD global minimum tax forced a rethink. Vietnam adopted the 15 percent minimum from January 2024, which removed the value of the old tax holidays for the largest investors, and replaced them with a fund offering cash support for research, training and high-technology projects. The transition was untidy, and several large investors delayed decisions in 2024 while the rules were written.

Provinces matter more than outsiders assume. Bắc Ninh, Bắc Giang and Hải Phòng ran investment promotion like sales organisations, with dedicated teams, fast-track licensing measured in days, and a habit of pre-building power substations before a client asked. Southern provinces such as Bình Dương and Đồng Nai, which had led in the 2000s, lost share partly because their land was fuller and their logistics more congested, and partly because the electronics belt gravitated north toward China.

The state also absorbed the political cost of the model. Labour disputes at foreign plants, land clearance conflicts, the 2014 anti-China riots that damaged Taiwanese and Chinese factories in Bình Dương, and the summer 2023 power cuts in the north were all handled with an eye to reassuring investors first. That reflex, rather than any single incentive, is what foreign boards mean when they say Vietnam is reliable.

What could go wrong with the China Plus One model?

Three things: the United States could stop tolerating the surplus, China could stop supplying the parts, or Vietnam could run out of the cheap power, land and labour that made it attractive. Each of those risks became visible between 2023 and 2025, and none has been fully resolved.

The American risk is the most immediate. The 46 percent reciprocal tariff announced in April 2025, later negotiated down to a headline 20 percent with a 40 percent rate for goods deemed transshipped, was a direct response to the bilateral deficit that China Plus One created. Subsequent litigation over the legal basis of those tariffs in the US courts changed the instruments but not the intent; the administration’s view that Vietnam is a back door for Chinese goods has not gone away, and every future negotiation starts from it.

The Chinese risk is quieter. Beijing has shown, with export controls on gallium, germanium, graphite and rare-earth magnets, that it is willing to restrict inputs its rivals depend on. A Vietnamese assembly plant that cannot get Chinese components is a building. Chinese firms are also relocating higher-value stages into Vietnam themselves, which keeps the supply chain intact but deepens rather than reduces the dependence.

The domestic risk is capacity. Northern Vietnam suffered rolling blackouts in June 2023 that shut foreign plants for days, a shock that the industrial community had not experienced before and that Samsung and Foxconn raised at ministerial level. The grid has since been reinforced, but electricity demand is growing at close to double digits, the power-plan targets are ambitious, and industrial land in the core provinces is filling. Wages in the electronics belt have risen faster than productivity for several years, and factories already recruit from provinces hundreds of kilometres away.

What does the China Plus One story mean for founders, investors and operators?

That the opportunity in Vietnam is in the supply chain gaps, not in competing with the multinationals. The assembly step has been taken; the value lies in the components, services, logistics and compliance that the assemblers still import or improvise.

For founders, the most durable niches are the ones that solve a multinational’s local problem: precision plastic and metal parts to Samsung or Foxconn specifications, factory automation and maintenance, industrial waste treatment, worker housing and transport, and the origin-documentation and compliance work that the tariff regime has made valuable. Vietnamese firms that have grown into these roles, from stamping shops in Bắc Ninh to logistics operators in Hải Phòng, have done so by being certified suppliers rather than by owning a brand.

For investors, the listed exposure is indirect. There is no listed Vietnamese company that is primarily a China Plus One beneficiary in the way Samsung or Foxconn are; the closest proxies are the industrial-park developers, the port operators at Hải Phòng and Cái Mép, the power producers and the logistics firms. Each of those carries its own regulatory risk, and the relationship between FDI and their earnings is real but lagged.

For operators inside a multinational, the practical lessons are about resilience. Dual-source power with on-site generation or rooftop solar, keep a component buffer that reflects the fact that the border can close, treat the provincial People’s Committee as a partner whose reputation is tied to your project, and build an origin-tracking system before a customs authority asks for one. The firms that were embarrassed in 2023 and 2025 were not the ones that had made those investments.

Is Vietnam a permanent alternative to China, or a temporary one?

A permanent complement and a temporary substitute. Vietnam is large enough to host a great deal of assembly for decades, but it is not large enough, in land, power, engineers or component makers, to replace China, and its own government has never claimed it could.

The comparison is one of scale. Vietnam’s manufacturing workforce is a fraction of Guangdong province’s, its industrial electricity supply is a small multiple of a single Chinese coastal city’s, and its engineering graduate output is measured in tens of thousands a year rather than millions. What Vietnam can do, and has done, is take the most labour-intensive final stages of a small number of very large product categories and run them well.

The more interesting question is whether Vietnam can move up the chain the way South Korea and Taiwan did, from assembling other people’s products to owning designs and components. The government’s semiconductor strategy, the push for domestic supplier development and the outbound ambitions of firms like FPT and VinFast, which are followed in the outbound-wave article, are all attempts to answer that question. The honest assessment in 2026 is that the assembly platform is secure, the upgrade is unproven, and the tariff politics of Washington will decide more about the next five years than anything in Hanoi.

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