Vietnam's electronics sector posts $12bn trade deficit in 7 months as investment drives imports

Although the sector recorded nearly $126 billion in exports during the period, the highest export turnover among Vietnam's manufacturing and processing industries, its trade balance remained in deficit, Do Thi Thuy Huong, vice-chairwoman of the association, told Tuoi Tre (Youth) online newspaper.

The deficit in the first seven months of the year was concentrated in computers, electronic products and components, which posted a $45 billion trade deficit, far higher than the roughly $25 billion recorded in the same period last year.

Meanwhile, phones and their components recorded a $32.67 billion trade surplus.

As a result, the sector recorded an overall deficit of $12.33 billion.

Huong attributed the sharp increase in the computer and component trade deficit to several factors.

The first is the surge in investment in AI and data centers, which has prompted chip manufacturers to focus on supplying these sectors.

This has tightened chip supplies for products such as phones, computers and automobiles, driving up prices by 5-20 percent, Huong said.

Facing higher prices and shortages, businesses began stockpiling chips and other components early in the year to secure supplies for the rest of the year.

This increased companies' import spending, significantly widening the trade deficit in computers and components.

The second is that manufacturers have accelerated production and expanded orders to support this year's economic growth targets, including the goal of achieving double-digit growth.

Higher production volumes require larger quantities of imported raw materials and components, pushing up import spending.

The third is the expansion of production and investment by major foreign-invested enterprises in Vietnam, particularly in electronics, which has driven up imports of machinery, equipment, production lines, raw materials and components for new and expanded facilities serving computer manufacturing and data centers.

Despite the deficit, the association does not consider the current situation a major concern because the increased imports are for long-term investment rather than consumption.

Businesses are importing machinery, equipment, production lines, raw materials and components to build up production capacity, increasing the trade deficit in the short term but laying the foundation for greater industrial output and added value over the longer term.

The association expects the electronics trade balance to improve in the second half of the year as manufacturers accelerate shipments to meet demand during the November and December shopping season in the United States and Europe.

Huong said the overall electronics trade balance could return to equilibrium in the rest of the year, although the computer and component segment could remain in deficit as newly established and expanding businesses continue to invest.

To address the trade deficit over the longer term, the association has proposed government policies to strengthen the capacity of Vietnamese suppliers and help reduce imports.

Huong also said stronger support is needed to connect Vietnamese businesses with global corporations operating in Vietnam, enabling them to participate more deeply in global supply chains, meet their requirements and source more inputs locally, thereby reducing reliance on imports.