Vietnam Makes Demands
Vietnam is the new kid in town, making a bid to replace China as the mecca for CE and technology manufacturing in Asia. Samsung has invested over $17b in Vietnam over the last 10 years and Intel (INTC) opened a $1b semiconductor assembly and test facility, while Foxconn and Pegatron (4938.TT) have built out significant assembly facilities in the country, due to its low wages, young population, and numerous trade agreements, but there is a catch.
Vietnam is run by the Communist Party and earlier this week the Vietnamese government issued a decree stating that technology companies that operate in Vietnam must store their user data locally beginning October 1, which would force those without an office in the country to set up a local office. That’s the easy part as the decree states that “Data of all internet users ranging from financial records and biometric data to information on peoples' ethnicity and political views, or any data created by users while surfing the internet must be to stored domestically”, and authorities have the right to request that data during any investigation. Further, if any content is thought to be a violation of government guidelines, the government has the right to ask content providers to remove it. Social media firms such as Meta (FB) and data collectors such as Google (GOOG) will have 12 months to set up local offices and data storage and will be required to keep all data locally for at least two years.
Taking a nod from China, Vietnam began working up to such a rule starting in 2019 when it implemented new cyber-security rules, which were followed by social media content rules last year, so the upside to Vietnam’s manufacturing infrastructure and lucrative trade agreements is government censorship and a free look into data if so asked. These are the same issues that pushed companies out of China, and while their implementation might not be as rigorous as those on the Mainland, they are going to cause companies to think a bit more about the implications of adding production in Vietnam, especially if those rules are enforced or requests for data are actually made. There is always a downside.
Vietnam is run by the Communist Party and earlier this week the Vietnamese government issued a decree stating that technology companies that operate in Vietnam must store their user data locally beginning October 1, which would force those without an office in the country to set up a local office. That’s the easy part as the decree states that “Data of all internet users ranging from financial records and biometric data to information on peoples' ethnicity and political views, or any data created by users while surfing the internet must be to stored domestically”, and authorities have the right to request that data during any investigation. Further, if any content is thought to be a violation of government guidelines, the government has the right to ask content providers to remove it. Social media firms such as Meta (FB) and data collectors such as Google (GOOG) will have 12 months to set up local offices and data storage and will be required to keep all data locally for at least two years.
Taking a nod from China, Vietnam began working up to such a rule starting in 2019 when it implemented new cyber-security rules, which were followed by social media content rules last year, so the upside to Vietnam’s manufacturing infrastructure and lucrative trade agreements is government censorship and a free look into data if so asked. These are the same issues that pushed companies out of China, and while their implementation might not be as rigorous as those on the Mainland, they are going to cause companies to think a bit more about the implications of adding production in Vietnam, especially if those rules are enforced or requests for data are actually made. There is always a downside.
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