Where to Put Your electronics Plant: Vietnam or Thailand?

Real-world scenario: A Korean group making electronic components (capacitors, inductors) for the automotive supply chain needs a new 8,000-worker plant, with 70% of output exported to Japan and the EU. The board is split: Vietnam looks cheaper, but Thailand has a more mature automotive-electronics cluster. A gut-feel decision here can cost tens of millions of dollars if wrong.

This article does not tell you “which country is better” — there is no universal answer. Instead, it presents a 10-year total cost of ownership (TCO) model for the board to run its own numbers, with the Vietnam legal framework updated to 18 October 2026. The Thailand section is framework-level only; Thai local counsel should verify details before a final decision.

Why “land rent + wages” comparisons mislead

Most site-selection tables stop at three numbers: industrial-zone land rent, worker wages, and the headline incentive tax rate. Those three numbers mislead in three ways:

First, the headline rate is no longer the real rate. Since fiscal year 2024, Vietnam’s Resolution 107/2023/QH15 applies the global minimum tax (QDMTT) to in-scope multinational groups — the gap between tax actually paid in Vietnam and the 15% minimum is collected as a top-up. Decree 236/2025/ND-CP (effective 15 October 2025) provides the detail. A “4-year exemption, 9-year 50% reduction” on paper can be substantially flattened by QDMTT. Any TCO model that ignores QDMTT overstates Vietnam’s tax advantage.

Second, certification compliance is a hidden cost. Automotive electronic components typically face multiple certification layers: IATF 16949 quality-system qualification from customers, electrical-safety certification in each sales market, and — for products with radio functions — telecom certification country by country. Thailand requires mandatory TISI certification for many electrical-electronic product groups (mandatory TIS mark, application held by a Thai company, testing at domestic labs, factory assessment) plus NBTC type approval for telecom/radio devices. Vietnam requires type certification plus declaration of conformity for radio equipment under Circular 02/2024/TT-BTTTT. The cost and timeline differ by country and belong in the TCO.

Third, tariffs apply at the destination market, not the factory gate. With 70% of output going to Japan and the EU: goods of Vietnamese origin benefit under EVFTA (EU) and CPTPP (Japan); goods of Thai origin benefit under Thailand’s own FTAs. The preferential-rate gap per HS code can reach several percentage points of revenue — decisive on electronic-component margins.

Vietnam legal framework for an electronics plant

Project setup: Investment Registration Certificate (IRC) under the Investment Law 143/2025/QH15 (effective 1 March 2026, replacing Law 61/2020) and Decree 96/2026/ND-CP; Enterprise Registration Certificate under Decree 168/2025/ND-CP. Projects inside industrial zones work with the IZ Management Board under Decree 35/2022/ND-CP.

Land: sub-lease inside an industrial zone under the Land Law 31/2024/QH15 (effective 1 August 2024) — foreign investors lease from the IZ infrastructure developer, paying once or annually.

Tax: standard 20% corporate income tax under the CIT Law 67/2025/QH15 (effective 1 October 2025); incentives by location and sector (high-tech projects and electronic-component manufacturing may qualify — check the specific lists); plus the QDMTT layer under Resolution 107/2023/QH15 and Decree 236/2025/ND-CP for in-scope groups. Dividends paid to foreign organisations: Vietnamese domestic law imposes no withholding tax at source (0%) — a key input when modelling cash repatriation to the parent.

Customs: Customs Law 54/2014/QH13; exports to the EU/Japan use the origin rules and preferential rates of EVFTA/CPTPP — determine the HS code and satisfy origin rules from the supply-chain design stage (the share of inputs imported from non-FTA countries directly affects preferential eligibility).

Digital industry: the Digital Technology Industry Law 71/2025/QH15 (effective 1 January 2026) creates an incentive framework for digital-technology activities — component manufacturing serving digital transformation may warrant a closer look at scope.

The 10-year TCO model: six cost buckets

Run three scenarios: (A) headline incentive rates; (B) real tax after QDMTT; (C) scenario B plus destination-market tariff volatility (e.g. anti-dumping investigations against goods from each origin). In many component projects, the country ranking flips between scenario A and scenario C.

Three deciding questions beyond the spreadsheet

Question 1: Where are your automotive customers already? Components live in clusters — Tier-1 and Tier-2 suppliers within just-in-time delivery radius. If your carmakers and Tier-1s sit in Thailand, the logistics cost and disruption risk of a Vietnam plant can swallow the tax gap. Conversely, if your customers are the electronics makers in Bac Ninh–Bac Giang–Hai Phong, Vietnam wins this criterion outright.

Question 2: Where can you hire engineers faster? An 8,000-worker plant needs several hundred electronics engineers. The realistic hiring and retention capacity in each specific locality (not “the country as a whole”) decides ramp-up time. Six to twelve months of training a fresh engineer cohort is a TCO item rarely found in investment brochures.

Question 3: Which policy risk can you live with? Every tax incentive comes with commitments (capital, headcount, technology) and can be reviewed. Model the case where incentives narrow in year five — whichever location stays profitable is the durable choice.

Companies building a TCO model for an electronics project in Vietnam and needing a review of the investment–land–tax–customs legal framework before locking in a site can speak with our team to cross-check each cost bucket against current regulations.

Frequently asked questions

1. Does a “4-year exemption, 9-year reduction” still mean anything after QDMTT?
It still matters for companies outside the global minimum tax scope. For groups in scope of Resolution 107/2023/QH15, the gap up to the 15% minimum is collected as a top-up under Decree 236/2025/ND-CP — model the real tax instead of using the headline rate.

2. Does a plant inside an IZ still need an IRC?
Yes. A foreign-invested project in an industrial zone still needs an Investment Registration Certificate under Investment Law 143/2025/QH15, issued by the IZ Management Board under Decree 35/2022/ND-CP and Decree 96/2026/ND-CP.

3. Exporting 70% to Japan and the EU — which FTAs matter?
For Vietnamese-origin goods: EVFTA for the EU market and CPTPP for Japan. Pin down the exact HS code and prove origin under each agreement’s rules — this is day-one work for the trade-compliance team, not something to handle “after the plant is running”.

4. Does Thai TISI certification accept foreign test reports?
Under the current framework, TISI dossiers require testing at designated domestic Thai labs plus a factory assessment. Confirm per product group with Thai counsel or a consultant, as the mandatory list is updated over time.

5. Is the power-cost gap between the two countries material in TCO?
For a component plant, power is often a significant share of unit cost (especially cleanroom and precision air-conditioning processes). Compare not only the kWh price but grid stability — one abrupt outage on a semiconductor/component line can destroy a batch worth far more than the power savings.

6. Should we build in both countries to spread risk?
The “China + 1” strategy is evolving into multi-site footprints for many groups. But two plants mean two compliance machines, two certification systems, two management teams. Only do it when order volume lets each plant reach optimal capacity — otherwise duplicated fixed costs erase the entire risk-spreading benefit.

This article has been quality-reviewed by the FLAW AI Legal Council