As we all know, due to the Biden administration's 'US-China decoupling policy' in the United States, an increasing number of Chinese manufacturing industries are being compelled to relocate to Vietnam, with the electronics industry leading the way, for example, companies like GoerTek(SZ.002241), Luxshare Precision(SZ.002475), and Foxconn(TWSE.2317).

However, the growth of the electronics industry in Vietnam is encountering a major obstacle in the form of a significant "power shortage".

A street in Hanoi as lights are turned off to save electricity.

Since nationwide outages began in May 2023, thousands of factories in the region housing plants owned by Samsung Electronics Co. and suppliers to iPhone maker Apple Inc. have suffered from insufficient electricity supply. The northern provinces, particularly Bac Giang, have been the hardest hit by the crisis due to searing heat that has disrupted hydropower supply, low coal supplies, and failures at outdated power plants.

To alleviate the impact of the power shortage, The Vietnamese government allowing manufacturers to extend operating hours after blackouts curtailed production.

Manufacturers in Bac Giang can now operate from midnight until 5 p.m. daily, said Dao Xuan Cuong, chairman of the management board of the province’s industrial zones.  During the week of June 5, factories were told to curtail production between 5 p.m. and 7:45 a.m.

Bac Giang is giving industrial parks priority access to power during the day while saving electricity for citizens at night, Cuong said.  Plants should be able to run production lines normally in a couple of weeks, he said.

The measures will apply country-wide, he said.   "However, each province may have a slightly different solution depending on its priorities."

In this situation of severe power shortage, the Vietnamese government has started to seek help from China and signed a power purchase agreement with the Guangxi province in China for a 110 kV power grid project.It is worth mentioning that this is the second time in seven years that China has provided electricity to Vietnam to help it out of a difficult situation. 

The first phase of Guangxi's power supply to Vietnam will provide 68 million kilowatts of electricity, which will create a stable power supply for electronic production and people's daily lives in the northern region, where Vietnam's electronics industry is primarily concentrated. Looking ahead, China is anticipated to provide a monthly supply of 30 million kilowatts of electricity to Vietnam.