Forty years after Doi Moi opened a closed economy, Vietnam assembles phones, sews shoes, and builds electric cars for the world. The next question is harder: can the factory move up the value chain before wages and rivals catch up.
Published 14 October 2026 · 06:00 GMT
There is a stretch of industrial parks north of Hanoi where the world's electronics are put together. Clean rooms, dormitories, container yards, and power lines run to the horizon, and the phones and laptops that leave them end up in shops from Berlin to Boston. Forty years ago, Vietnam was one of the poorest countries in Asia, sealed off by war and central planning. Today it is the factory floor of the new Asia, and the question facing Hanoi is no longer how to attract the world's factories, but how to stop being only the place where things are assembled.
The turning point was Doi Moi, the renovation policy launched in 1986. Vietnam moved from central planning toward a market-oriented economy: prices were freed, private business was allowed, farmers got control over their output, and foreign investment was invited in. The results compounded over decades. Growth ran at a pace that turned a country of subsistence farmers into an exporting power. Poverty fell dramatically. Ho Chi Minh City and Hanoi grew into metropolises of millions, and a generation of Vietnamese grew up with the expectation that life would be better than their parents' had been.
The second wave came from outside. As wages rose in China and trade tensions grew between Washington and Beijing, global manufacturers began looking for a second base: the China plus one strategy. Vietnam was the most ready answer. It offered political stability, a long coastline with deep-water ports, a young workforce, and trade agreements that opened the doors of Europe, Japan, and the Americas. Samsung built vast complexes in the north. Intel, Nike, Adidas, and a long list of suppliers followed. Vietnam became the country that assembles the world's electronics and sews its shoes, and exports became the engine of the economy.
Assembly is a good business until it is not. The value in a smartphone sits mostly in the design, the chips, the software, and the brand, not in the hands that put it together. Vietnam's factories employ hundreds of thousands of people, but much of the value of what they produce flows to the foreign companies that own the designs and the supply chains. Economists call this the risk of the middle-income trap: a country grows fast on cheap labor and foreign investment, then stalls when wages rise and it cannot compete on cost with poorer rivals or on innovation with richer ones.
Vietnam's government knows the diagnosis. Its industrial policy pushes toward higher-value work: semiconductors, software, electric vehicles, and renewable energy equipment. Universities are training more engineers. Industrial parks are being upgraded for chip packaging and testing, the segment of the semiconductor business where Vietnam has the most realistic opening. The country has also invested heavily in infrastructure, including expressways, ports, and power, though power shortages in the north during hot months have reminded investors that the grid has not always kept pace with the factories.
No company embodies the ambition more than VinFast. Founded in 2017 by the country's largest conglomerate, Vingroup, the electric vehicle maker built a factory, launched models, and listed on the Nasdaq in 2023, briefly achieving a market valuation that stunned the auto industry. The company has sold cars in Vietnam and abroad, and its founder has backed it with large personal and corporate funding. It has also lost large sums of money, as new carmakers usually do. VinFast is, in miniature, the Vietnamese bet: that a country which learned to assemble the world's products can learn to brand its own.
The politics of the model matter too. Vietnam is governed by the Communist Party, and its leadership has pursued economic openness without political liberalization. Anti-corruption campaigns have reached high into the party and the business world, and the presidency and the party leadership have changed hands in ways that have occasionally unsettled investors. Yet the broad direction has held across leadership changes: keep the country open for business, keep the currency competitive, keep the trade agreements coming, and keep the factories humming. For investors, the continuity of policy has mattered more than the names at the top.
Western coverage reads Vietnam as the winner of the decoupling era. The China plus one story is told as a market verdict: companies voted with their factories, and Vietnam won the vote. Western business coverage emphasizes the trade agreements, the Samsung complexes, and the steady hand of economic management. In this telling, Vietnam is proof that openness works, and the main risk is that success breeds complacency.
The Western lens is also the most attentive to the tariff risk. Vietnam runs a large trade surplus with the United States, which makes it a target whenever Washington turns protectionist. Western analysts note that some of Vietnam's export boom reflects Chinese inputs passing through Vietnamese factories, and that American trade officials have noticed. In this telling, Vietnam's challenge is to prove that its exports are genuinely Vietnamese, not just relabeled.
Eastern coverage reads Vietnam through the rivalry lens. China remains Vietnam's largest trading partner and a source of inputs for its factories, and the two countries share a long border and a long history of conflict, including a border war in 1979 and recurring tensions in the South China Sea, where Vietnam is itself a claimant. In this telling, Vietnam's balancing act is the story: deep economic ties with China, a growing security relationship with the United States, and a determination not to be anyone's pawn.
The Eastern lens also notes that China plus one has not meant China minus one. Chinese firms have themselves invested heavily in Vietnam, building factories that supply the same global brands. In this telling, the supply chain did not leave China. It stretched, and Vietnam is the place where it stretched to. That framing suits Beijing, which can present Vietnam's rise as part of a regional production network centered on China, not as an escape from it.
Global South coverage reads Vietnam as a development story, and the numbers are the headline: decades of growth, a steep fall in poverty, and a country that moved from rice rationing to smartphone assembly in a single generation. In this telling, Vietnam is the proof that a poor country can industrialize without surrendering policy sovereignty, by opening gradually, on its own terms, and keeping the state in the driver's seat.
The Southern lens also asks who the factory serves. Wages in Vietnamese factories have risen, but labor organizers and independent unions face tight limits, and strikes are handled firmly. Environmental costs, from industrial pollution to coal-fired power, fall on Vietnamese communities. In this telling, the test of Vietnam's model is not the export figures. It is whether the workers who built the factory economy share in its wealth, and whether the rivers and air survive it.
