Summary

  • Electricity demand in Vietnam has grown 10% year on year for the last five years mostly due to new manufacturing facilities.
  • Vietnam’s GDP it is expected to grow at around 6.7% in 2021.
  • Power Technology Research estimates Vietnam’s T&D market CAGR, for the period 2020-2025, to be close to 3%, or almost double of the rest of APAC’s T&D market (1.6%).

Vietnam has shown remarkable economic development in the last three decades. Following reforms that started under Doi Moi in 1986, Vietnam has transformed from one of the world’s poorest nations into one considered lower middle income, as defined by the World Bank. From 2002 to 2019, GDP per capita rose from 430 USD to over 2700 USD (531%).

In 2020, when the world was hit by the pandemic and most countries were undergoing economic contraction, Vietnam’s economy grew 2.7% in the third quarter and close to 4.5% in the fourth. Year on year Vietnam posted 7% GDP growth rate for two consecutive years in 2018 and 2019.

The strength and resilience of the economy was attributed to control of the infection, a robust domestic demand, and strong exports, focused on manufacturing. Year on year, the processing and manufacturing sector grew over 4%, agricultural close to 3% and services sector about 2%.

Driving Factors

The shift of manufacturing plants from China to countries like Vietnam is being driven by:

  • Rising Manufacturing Costs – In 2019, the average yearly wage in manufacturing was over 11900 USD which is a 113% increase since 2011 as per the of Statistics of China.
  • The U.S.-China trade war – Tariffs placed on exports. Vietnam has 12 free trade agreements with the European Union, UK, Canada, South Korea, Japan and the U.S. among others.
  • Supply chain. – COVID-19 made many realize that having a ‘China supply chain’ needed to be addressed. The pandemic prompted many companies to consider manufacturing in Vietnam in a bid to diversify their supply chain.

Although some companies are moving from , many multinational companies are heavily invested in China production facilities and their presence will remain. In addition, access to the China’s massive consumer market is something the companies want a piece of.

Companies shifting to Vietnam

Recent companies that have announced expanded operations or moving to Vietnam include:

  • Samsung Electronics
  • Most of its display production will shift from plants in China to Southern Vietnam. Samsung already produces screens in Vietnam where it has six factories and two R&D centers for the same purpose.
  • Shifted production of its last personal computer factory from Suzhou, China to Vietnam. In 2018 this factory exported 1 billion USD worth of electronics.
  • Apple requested its major supplier, the Taiwanese manufacturing firm Foxconn, to shift some assembly from China to Vietnam in an attempt to mitigate the impact of the U.S.-Sino trade war. Foxconn plans to build a 270 million USD plant in Bac Giang province, outside of Hanoi. The plant, for Apple’s iPad tablet and MacBook laptop assembly, is expected to come online in the first half of 2021.
  • Intel announced in January a further investment of 475 million USD in their state-of-the-art chip assembly and test manufacturing facility in Saigon.

Impact on Electricity Demand in Vietnam

 

Electricity demand in Vietnam has grown 10% year on year for the last five years mostly due to new manufacturing facilities. This demand is not only due to growth in country’s economy, but it itself is triggering the T&D growth throughout the electricity supply chain (generation, transmission and distribution sector).

Vietnam’s state-owned electric company, Vietnam Electricity Corporation (EVN) estimates 150 billion USD in capital investments will be required for generation and grid upgrades by 2030. To satisfy demand, In the next 10 years, Vietnam plans to invest 96 billion USD in new power plants and about 37 billion USD to expanding the power grid infrastructure.

As of December 2018, EVN was importing 1.5% of their power from China and Laos and recently, facing severe power shortages, signed five new deals to buy electricity from Laos. Demand is expected to exceed supply by 6.6 billion kWh.

 

Change in Energy Mix

EVN’s most recent annual report shows the total installed capacity was over 48,500 MW, with hydropower at about 35%, coal 38% and renewable energy just over 7% (Figure 1).

 

meeting power demand

Figure 1: Installed capacity portfolio of Vietnam as of 31st December 2018.
Source: Annual report of Vietnam Electricity (2018).

Vietnam has been a net importer of coal, natural gas and crude oil, but as costs rise, the country has established ambitious renewable energy targets. In Feb. 2021, the Ministry of Industry and Trade of Vietnam issued a draft proposal for the national power development plan. The Draft PDP8 covers the period 2021-2030 and some highlights :

  • Coal fired thermal power generation capacity will be reduced from 34% in 2020 to 27% in 2030.
  • Gas power plants will increase from 7GW in 2020, to 13.5 GW in 2025 and over 28 GW in 2030.
  • Wind power capacity will increase from about 600 MW in 2020 to over 11-12 GW in 2025 and over 18 GW in 2030.
  • In 2020, Vietnam had 9GW of installed rooftop solar and plans 17GW in 2020-2025 and greater than 19 GW in 2030.
  • Other power sources addressed include battery energy storage and pumped-storage hydropower.

 

Looking Ahead

The T&D market will continue to grow. OEMs are establishing new facilities, upgrading/expanding existing facilities or M&A agreements in a bid to establish foothold in the country.

  • Recently Hitachi ABB Power Grids’ transformer facility in Hanoi upgraded its transformer manufacturing and testing facilities from 171 KV to 230 KV to meet orders from solar and wind power customers.
  • Trung Nam group has commissioned Southeast Asia’s largest solar plant with a capacity of 450 MW and capable of producing one billion kilowatt hours of electricity per year
  • Siemens Energy has been awarded a contract by Technology Resources Energy (TRE) to equip two onshore windfarms (IaPet-Dak Doa 1 and IaPet-Dak Doa 2) in Vietnam with digitally enhanced transmission equipment including five power transformers
  • Also, Meiden Asia plans to acquire a 41% stake in Vietstar Industry Corporation, a leading low and medium voltage switchgear manufacturer.

Vietnam’s GDP it is expected to grow at around 6.7% in 2021 which is 1.5% less than expected, due to the effects of the pandemic. Power Technology Research estimates Vietnam’s T&D market CAGR, for the period 2020-2025, to be close to 3%, or almost double of the rest of APAC’s T&D market (1.6%).

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