Green manufacturing in Vietnam

Taiwanese companies have been part of Vietnam’s manufacturing landscape since the 1990s. They have established a presence across sectors including electronics, textiles and materials.

However, the conditions for manufacturing are changing. Vietnam is pushing toward net zero emissions by 2050, while global companies are placing greater environmental demands on their suppliers.

For Vietnam, the green transition is becoming part of a broader challenge: How to remain competitive as the requirements of global manufacturing change.

That shift is important to Taiwanese companies already operating in Vietnam. Many supply global brands whose environmental requirements are becoming stricter. Apple, for example, requires its entire direct manufacturing supply chain to use 100 percent renewable electricity for Apple production before 2030. Last year, more than 20 gigawatts of renewable energy procured by suppliers and online in Apple’s supply chain generated more than 38 million megawatt-hours of clean energy.

Requirements like those do not stop at the headquarters of global brands. They reach the factories producing their components and products. For Taiwanese manufacturers in Vietnam, reducing emissions is gradually becoming a part of doing business. A competitive manufacturing location is no longer judged only by labor costs, infrastructure or access to markets. The availability of cleaner electricity is becoming part of the equation.

Vietnam is moving in that direction. Its revised Power Development Plan VIII, approved in April last year, targets renewable energy, excluding hydropower, at 28 to 36 percent of the power mix by 2030. The plan also places emphasis on developing the power system and grid to meet rising demand. Vietnam has also introduced a direct power purchase mechanism, allowing large electricity users to buy power directly from renewable-energy generators. The framework was updated in June.

However, for Taiwanese manufacturers, green electricity is only part of the issue: The power also has to be reliable. Vietnam’s electricity shortages in 2023 exposed the vulnerability of its rapidly expanding industrial base. In 2024, authorities asked major manufacturers in northern Vietnam, including Foxconn, to voluntarily reduce electricity use by 30 percent during periods of high demand. The request was precautionary rather than mandatory, but it highlighted a problem that matters to manufacturers operating in global supply chains: An interruption in electricity can quickly become an interruption in production.

This is where the interests of Vietnam and Taiwanese manufacturers begin to overlap. Vietnam needs to expand cleaner energy while making its electricity system more reliable. Taiwanese companies need a production base that can meet the environmental expectations of global customers without compromising the stability of their operations.

Some companies are already responding. Foxconn and Brookfield in June announced that they would jointly develop up to 1 gigawatt of utility-scale wind, solar and battery capacity in Vietnam, supported by long-term power-purchase agreements. The significance is not simply the size of the proposed investment. It points to a broader shift: Manufacturers are becoming more interested in the energy infrastructure around their factories, not just the factories themselves.

The same trend can be seen elsewhere in Taiwan’s manufacturing presence. Far Eastern New Century has been expanding renewable-energy use across its production network, including operations in Vietnam. Taiwanese manufacturer Je Hong Textile is developing a new factory in Vietnam focused on environmentally friendly fabrics, with features including wastewater treatment, LEED Gold standards and planned solar generation. Tainan Enterprises has also operated a LEED Gold-certified facility in Vietnam since 2017.

These examples do not mean that every Taiwanese factory in Vietnam is already green or that the transition will be easy — companies face different costs, technologies and regulatory conditions — but they show that Vietnam already has an established group of Taiwanese manufacturers with reasons to invest in cleaner production. That creates an opportunity to deepen the economic relationship.

Taiwan-Vietnam ties have long been shaped by trade, investment and manufacturing. The “China Plus One” strategy — avoiding a reliance solely on manufacturing and sourcing in China — has added to Vietnam’s importance as companies diversify production beyond China.

However, the next stage does not necessarily have to mean simply building more factories. Vietnam itself wants to attract investment that brings greater technology and value, while moving toward higher-value and more complex activities within global value chains. The World Bank has identified this as an important part of Vietnam’s longer-term development path.

Renewable electricity alone will not move Vietnam up the value chain. What it can do is help create the industrial conditions that increasingly matter to international manufacturers: cleaner production, more reliable power and the ability to meet tougher environmental standards. For Taiwanese companies, that makes Vietnam’s energy transition increasingly relevant to their own competitiveness. For Vietnam, it offers a way to improve an industrial base that is already closely connected to global production.

The foundations are already there. Taiwanese companies have spent decades building factories and production networks in Vietnam. Vietnam is now changing what it expects from its industrial economy. The next chapter of Taiwan-Vietnam economic cooperation might be less about how many factories are built and more about the conditions the factories operate in: cleaner energy, reliable electricity and an industrial environment that can meet increasingly demanding international standards.

For Vietnam, the task is to make the industrial base it has built over the decades greener and more competitive, while becoming better positioned in higher-value parts of global value chains.

Tran Thi Mong Tuyen is a research fellow at the Pacific Forum, a Rotary Scholar and a doctoral candidate at National Chengchi University. She is also a former fellow at the Ministry of Foreign Affairs and a visiting academic at National Taiwan University.