A few years ago, rising wages in China made cheaper Vietnamese electronic assembly the next big thing. But no one counted on the port failing.
In 2011, riding a wave of interest from companies, including Intel, the Vietnamese government announced it had undertaken a $620 million port expansion program.
Two years later, however, the port hasn't taken off. Delayed by a year, the project hasn't proven popular with shippers.
Today, even if a company could assemble phones or laptops cheaper in Vietnam, it wasn't at all clear without the port that business was viable. Inefficiencies in moving the electronics to markets were eating into Vietnamese suppliers' profit margins.
Enter DHL. Late last month. The shipping giant announced that it would spent $13 million to improve supply efficiency in Vietnam. The company intends to hire more than 2,000 employees in the country by 2015, and increase its warehouse space by at least 50 percent.
The story of the Vietnamese port is telling for a few reasons. The obvious ones are that Vietnam's wages are still so attractive to electronics suppliers, many are willing to put up with uncertainty in the country's ability to meet the electronics supply chain's capacity needs.
The more surprising part of the story is DHL's response. True, a $13 million, multi-year bet on the country, while considerable, is not an enormous gamble. If the port gets its kinks out — the problems were half engineering, half bureaucratic — maybe container shipping will eat DHL's lunch, just as it arrives.
The DHL investment is hard not to read as an honest commitment to keeping Vietnam viable in the electronics supply industry. Clearly, as anyone working in Asian electronics supply chains knows all too well, the Vietnamese role in electronics assembly is now key. Canon is there. Intel is there. Virtually everyone is there after two years of shifting away from rising Chinese wages.
Yet the infrastructure promised two years ago isn't ready yet, and doesn't work very well where it is ready.
The result is confusion. It's nearly impossible to envision what the Vietnamese link in your supply chain will look like in five years. Small-scale, piecemeal investments like DHL's (just announced last month) are so far proving more effective in keeping Vietnam in the game, than are massive port projects that strain the nation's ability to deliver shipping capacity on time.
Walk the walk
Will that be enough? At the moment, it is. But how long can that last? Vietnam's success at luring business from China has caused some to ask whether the country will be able to actually deliver.
We know the answer to that now. Vietnam can't so far ensure that an electronic component mailed from Ha Naio will arrive to the next stop on the chain in Malaysia. Until it can — until its ports open — the future electronics supply professionals are planning for looks a lot like the present. Private, usually foreign supply chain services move items in batches, rather than whole ships moving three or four month's supply to the next factory in one swoop.
It's something Vietnam is going to have to get right. And it will. The question is when. Right now, a new Canon printer may or may not be able to leave the country and reach clients abroad. Until it can, companies are going to be nervous in Vietnam.
But they haven't left yet either, which does suggest hopes for the future of Vietnam's supply capacity, no matter how it may look right now.