Turning pressure into progress

Vietnam’s tech industry is facing its biggest challenge yet. After the US announced the plan to impose a 46 percent tariff (though currently paused for 90 days to allow for trade negotiations) on key Vietnamese tech exports, alarm bells rang across the sector.

For a nation that has steadily built itself as a prominent player in electronics and semiconductors, the sudden cost hike is a serious blow. While the impact was somewhat expected due to the US trade deficit with Vietnam, the third largest after China and Mexico, it remains a significant challenge.

Vietnam isn’t standing still. Many of its tech companies are adapting fast. They are turning to smart technologies, investing in software and digital services, and looking beyond traditional markets to survive and mitigate the impact.

Vietnam has long benefitted from global trade shifts, in particular the tensions between the US and China. This time, the pressure is closer to home. The new tariffs make Vietnamese exports like phones and semiconductors, such as Intel chips, less competitive in the US, one of the largest markets.

Still, this challenge may prove to be a turning point. Rather than waiting for trade winds to change, Vietnamese companies are taking action. Vietnam has pledged to prevent Chinese goods from being rerouted through the country - a move aimed at easing concerns around unfair trade and demonstrating alignment with the Trump administration’s policies.

From factory floors to smart manufacturing

As labour costs rise and trade becomes unpredictable, Vietnamese tech companies are leaning into AI and automation. These tools are not only trendy but practical. Vietnam’s largest tech firm FPT Corporation has launched a $US174 million AI centre and is investing another $US200 million in a high-tech manufacturing facility. Their focus includes software development, cybersecurity, and cutting-edge generative AI. Not every company has the same resources, but it’s gaining traction: use smart tools to reduce costs, boost productivity, and remain agile in a rapidly evolving landscape.

Vietnam was once known for affordable labor and efficient assembly lines. That is changing. More companies are shifting to smart manufacturing, using automation such as robotics, IoT sensors, and data analytics to produce goods more quickly and accurately. Some are offering digital transformation services to help companies modernize. With tools like IoT, a factory can monitor power consumption, detect defects in real time, and control machinery remotely. This technology is helping Vietnam climb the global value chain.

This shift does not come without challenges. It requires new training, new tools, and new ways of thinking. But for many companies, it is the only way forward.

Vietnam’s next frontier is digital services. Products such as cloud computing, software-as-a-service (SaaS), and mobile applications are not subject to tariffs like physical goods. VNG Corporation is a case in point. Originally known for games and mobile apps, it is now offering global cloud services. Selling digital products helps businesses bypass tariffs, expand internationally, and reduce dependency on any one market.

This shift signals something much bigger. Vietnam is gradually moving away from being a low-cost manufacturing hub and towards becoming a creative and digital force on the global stage, while lower-value manufacturing relocates to other developing countries such as Sri Lanka.

Looking beyond the US and to the future

With American trade ties more uncertain, Vietnam is exploring new export lanes. Agreements with CPTPP, EVFTA, and RCEP provide access to countries including Japan, Canada, the EU, and neighbors across Asia. These deals help spread the risk so that no single market becomes make-or-break. For tech companies, this translates to greater stability and opportunities for growth.

Alongside trade diversification, Vietnam’s government and private sector are promoting deeper innovation. Initiatives like the AI-Semiconductor conference (AISC 2025) aim to accelerate research in artificial intelligence and semiconductor development – both of which are critical if Vietnam is to remain competitive. Transitioning from low-margin manufacturing to high-value design and innovation is a steep climb. It requires time, talent, and capital. But the ambition is strong, and investments are increasing.

Vietnam’s tech scene is at a turning point – and it is time to make bold moves. Companies must go beyond basic manufacturing and invest in smarter tools like AI and automation. However, they cannot do it alone. The government has a crucial role to play in making it easier to access funding and in supporting research that helps local companies scale. Schools and universities must train young people in digital skills so they are ready for the jobs of tomorrow. For investors, the message is clear: there is real potential in Vietnam’s startups and digital services that can scale globally.

Momentum must not be lost. Rising wages could cause Vietnam to lose its edge in low-cost manufacturing. At the same time, the country has yet to establish itself as a major player in high-end tech – placing it in a vulnerable position. Relying heavily on a single market like the US also exposes the country to further external shocks. As other countries in the region move swiftly, Vietnam needs to accelerate its efforts to stay competitive.

Encouragingly, Vietnam is not starting from scratch. There are good examples to draw from. South Korea built a strong tech economy by backing innovation. India made its mark by exporting digital services. Singapore became a global tech hub through smart planning and sustained investment.

Vietnam can take lessons from each of these models. By strengthening its own capabilities, using smart tools and with a clear strategy, Vietnam has the opportunity to shape the future and lead the region in the next wave of tech growth.