Vietnamese thirst for knowledge

With nano-thin margins in many electronics segments, it is only natural that OEMs are looking for the next low-cost place to build. Vietnam, which pops up on most radar screens, might be that place — or might not. The Asian low-cost leader has an upside and a downside. At Technology Forecasters’ Quarterly Forum in April, TFI senior economist Matthew Chanoff shared recommendations o...


With nano-thin margins in many electronics segments, it is only natural that OEMs are looking for the next low-cost place to build. Vietnam, which pops up on most radar screens, might be that place — or might not. The Asian low-cost leader has an upside and a downside.

At Technology Forecasters’ Quarterly Forum in April, TFI senior economist Matthew Chanoff shared recommendations on outsourcing in Vietnam. One issue he addressed is the labor force.

Vietnamese skilled workers are highly skilled, proficient in English and driven to learn what they don’t know. There just aren’t enough of them. This land of 80 million people has a skilled labor shortage. It should come as no surprise that even though Vietnam has a labor cost advantage, wages are rising. One Western executive says wages have skyrocketed 300% for top performers in the four years he’s been in Vietnam.

“The challenge everyone is beginning to face now is the relative lack of skills and experience versus the demand,” says Lorien Hamilton, operations director of Technology Resources Group, a Hanoi-based software reseller and service firm.

Hamilton, who serves as vice chair of the Information, Communication and Technology Committee of the Hanoi chapter of the American Chamber of Commerce in Vietnam, says turnover rates are as high as 40%: “The more skilled, experienced, and internationalized the person is, the more difficult it is to keep them. That individual can change jobs and double his salary every six months to a year.”

Unlike China, where there are literally millions or workers to do fairly low-tech production line work, Vietnam has a far smaller pool of people to draw from. Hamilton notes that GDP is running at more than 8% in Vietnam, second only to China, but that people often overlook the inflation rate, which is between 15% and 20% in Vietnam. “We recently had a big pay review within TRG and it seems to be much harder to match expectations with a sensible pay increase,” he says.

Jason Craft, managing director of Spartronics, the Vietnamese subsidiary of Sparton Corp., an EMS company based in Jackson, MI, says retaining staff is a challenge. Sparton, a high-mix, low-volume provider with about $200 million in annual revenue, built a factory in an industrial park near Ho Chi Minh City, and began to operate in 2005.

Craft says turnover can be brutal, but Spartronics has a relatively small churn among its 150 employees. He attributes that record to the fact that he’s the only Westerner in the plant, and that all his key staff positions are Vietnamese, which gives others in the workforce hope of being able to advance.

At most foreign companies he knows in Vietnam, the top two layers of management are expatriates, Craft says. His management team is Vietnamese, and has proven highly capable. At the time we talked, Craft had just completed home leave: “My staff proved they can do it. I’ve been in the U.S. for a month and they’ve run it without me.”

This is an opportunity they would not find at most other plants. “Some guys working for me had worked elsewhere and were three levels down and were going no higher,” Craft says. “That is why they came to work for me.”

Craft has seen Western companies struggle because they don’t pay attention to basics. “I’ve learned a lot of things about the Vietnamese and how to treat them. You’d better know what motivates and drives them so you can create benefits and retain them,” he says.

Vietnamese workers are extremely loyal when given a chance to keep learning, he says. “Right now they really value education and the challenge of learning things new. They’re not much different from Americans in this regard.”

Whatever the Vietnamese lack in engineering education, they seem to make up for with a thirst for knowledge. “If they don’t know something, they go learn it in a couple of days,” he notes. “My engineering force here is almost as competent as the one in the U.S.”

Craft says members of his management team all speak English, and the entire workforce understands enough English that he can deliver instructions in English. He believes he has scored points with his management and engineering teams by training them in modern management practices, including Six Sigma and Lean, which they’ve been able to apply in the plant.

Author Information

Adapted from an April 3, 2008, blog posting by Bill Roberts of Technology Forecasters Inc., a global consulting and research firm specializing in outsourcing and the environment based in Alameda, CA. Contact Diane Krandel at .

No comments
The Engineers' Choice Awards highlight some of the best new control, instrumentation and automation products as chosen by...
Each year, a panel of Control Engineering editors and industry expert judges select the System Integrator of the Year Award winners.
The Engineering Leaders Under 40 program identifies and gives recognition to young engineers who...
Learn how to increase device reliability in harsh environments and decrease unplanned system downtime.
This eGuide contains a series of articles and videos that considers theoretical and practical; immediate needs and a look into the future.
Learn how to create value with re-use; gain productivity with lean automation and connectivity, and optimize panel design and construction.
Go deep: Automation tackles offshore oil challenges; Ethernet advice; Wireless robotics; Product exclusives; Digital edition exclusives
Lost in the gray scale? How to get effective HMIs; Best practices: Integrate old and new wireless systems; Smart software, networks; Service provider certifications
Fixing PID: Part 2: Tweaking controller strategy; Machine safety networks; Salary survey and career advice; Smart I/O architecture; Product exclusives
The Ask Control Engineering blog covers all aspects of automation, including motors, drives, sensors, motion control, machine control, and embedded systems.
Look at the basics of industrial wireless technologies, wireless concepts, wireless standards, and wireless best practices with Daniel E. Capano of Diversified Technical Services Inc.
Join this ongoing discussion of machine guarding topics, including solutions assessments, regulatory compliance, gap analysis...
This is a blog from the trenches – written by engineers who are implementing and upgrading control systems every day across every industry.
IMS Research, recently acquired by IHS Inc., is a leading independent supplier of market research and consultancy to the global electronics industry.

Find and connect with the most suitable service provider for your unique application. Start searching the Global System Integrator Database Now!

Case Study Database

Case Study Database

Get more exposure for your case study by uploading it to the Control Engineering case study database, where end-users can identify relevant solutions and explore what the experts are doing to effectively implement a variety of technology and productivity related projects.

These case studies provide examples of how knowledgeable solution providers have used technology, processes and people to create effective and successful implementations in real-world situations. Case studies can be completed by filling out a simple online form where you can outline the project title, abstract, and full story in 1500 words or less; upload photos, videos and a logo.

Click here to visit the Case Study Database and upload your case study.