Vietnam's manufacturing survival race: How dual transformation reshapes ASEAN supply chain landscape

Vietnam's manufacturing industry is standing at a critical crossroads. As a core engine of economic growth, this sector has long relied on a development model characterized by low-cost labor, high energy consumption, and high emissions. Now, under the dual pressures of global trade rules and supply chain restructuring, this model is no longer sustainable. The integration of green production and artificial intelligence—the "dual transition" strategy—is becoming the only choice for Vietnam's manufacturing industry to survive and upgrade. This transformation will not only determine whether Vietnam can maintain its position in the global supply chain, but will also profoundly affect the industrial division of labor and cooperation landscape within the ASEAN region.

External pressures driving the transition. The entry barriers for the international market are undergoing fundamental changes. A new generation of trade agreements, such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), the European Green Deal, and the Carbon Border Adjustment Mechanism (CBAM), have turned sustainability standards from optional into mandatory conditions for exports. Vietnam's export-oriented manufacturing—from textiles and food processing to wood products—must quickly adapt to non-tariff requirements such as carbon footprint tracking and data transparency. This means that the era of relying solely on price advantages to compete globally is over; future competition will center around green certifications and digital capabilities.

Dual transition: from cost advantage to technological advantage. Nguyen Hong Dien, Minister of Industry and Trade of Vietnam, has repeatedly pointed out that the dual transition is a strategic priority. On one hand, the green transition needs to advance in sync with energy security; on the other hand, digital transformation is positioned as a major breakthrough. In recent years, Vietnam's manufacturing sector has grown at an average annual rate of 6.9%, but to maintain this momentum, it must overcome institutional bottlenecks and increase support for industrial modernization and self-reliance. The dual transition is no longer an add-on to corporate social responsibility; it is an imperative for economic survival.

Artificial intelligence and the Internet of Things are being deployed in industrial parks: automated waste sorting, real-time emissions monitoring, and AI-driven demand forecasting to reduce inventory and material waste. These technologies lay the foundation for "smart factories," aligning economic efficiency with environmental sustainability. However, Vietnam's manufacturing sector remains highly dependent on manual labor, with limited adoption of robotics and AI. Experts point out that enterprises must shift from simple assembly and processing to higher-value "Made in Vietnam" products, mastering smart manufacturing technologies, increasing R&D investment, and integrating AI into production processes.

Small and medium-sized enterprises: the key and bottleneck of the transition. SMEs, which account for over 97% of all enterprises in Vietnam, play a core role in the dual transition, but high initial investment and a shortage of skilled workers pose major obstacles. Export-oriented industries (such as agricultural product processing, food, textiles, and wood products) are the most proactive in adopting green and smart production practices. Dennis Quennet, a representative of the German Agency for International Cooperation (GIZ), pointed out that SMEs are the backbone of the economy and often lead innovation. Combining digital technology with green development can help enterprises reduce costs, improve resource efficiency, and thus enter new markets and achieve long-term growth.## ASEAN Regional Perspective: Supply Chain Restructuring and Synergy Opportunities. Vietnam's dual transformation is not an isolated process, but part of the upgrading of the ASEAN regional supply chain. As global manufacturing shifts out of China, Vietnam has become one of the main beneficiaries of the "China+1" strategy. However, simply taking on low-end manufacturing can no longer meet the requirements of new rules. Whether Vietnam can enhance its added value through dual transformation will determine its competitive positioning within ASEAN.

At the same time, other ASEAN member states are also advancing similar transformations. For example, Thailand focuses on electric vehicles and digital manufacturing, while Indonesia is working on downstream nickel industries and new energy. Vietnam's transformation experience—especially the path of digitalization for small and medium enterprises—can serve as a reference for the region. The construction of the ASEAN Economic Community requires members to strengthen coordination on green standards and digital interoperability to avoid fragmentation. Vietnam's proactive dual transformation helps enhance the resilience and sustainability of the entire regional supply chain.

Long-term Trend: From Manufacturing Base to Innovation Hub. The ultimate goal of dual transformation is not simple technological upgrading, but to build an industrial system with higher added value, technological autonomy, and sustainability. For ASEAN, Vietnam's success will prove that emerging economies can leapfrog the middle-income trap and directly advance toward green smart manufacturing. In the future, Vietnam's manufacturing industry may transform from a global "assembly workshop" into a regional R&D and smart production center. However, this process requires policy support, talent cultivation, and investment guidance, especially financing and technical assistance for small and medium enterprises.

Conclusion. The dual transformation of Vietnam's manufacturing industry is a race for survival, but it is also an opportunity to redefine the country's and the region's industrial position. Driven by rules such as CPTPP and CBAM, the integration of green and digitalization has become an irreversible trend. Vietnam needs to accelerate its actions, and other ASEAN countries should also pay attention to this process, jointly building a more competitive and sustainable regional manufacturing network.