Vietnam’s rapid economic transformation is entering a new phase, with the country seeking to move beyond low-cost manufacturing and establish itself as a major destination for high-tech industries. However, an expanding demand for electricity is emerging as a significant challenge to those ambitions, particularly as the country seeks to attract investments in energy-intensive sectors such as semiconductor manufacturing.
Vietnam’s economic progress over nearly four decades has been closely linked to its policy of economic opening, known as “doi moi”. The country’s recent elevation to upper-middle-income status by the World Bank has been viewed as an important milestone in that journey. Yet Vietnamese leadership is increasingly focused on ensuring that economic growth does not stall at the middle-income level. The government is therefore seeking to move domestic industries higher up the value chain and encourage production of sophisticated goods rather than relying primarily on assembly and relatively low-value manufacturing.
Semiconductors are among the industries Vietnam hopes to develop. The sector, however, requires large and reliable supplies of electricity. That presents a problem for a country that has only recently made progress in dealing with recurring power shortages and blackouts. Any significant expansion of high-tech manufacturing would require Vietnam to strengthen both the availability and reliability of its electricity supply.
The government has identified liquefied natural gas, or LNG, as one possible solution. LNG-fired power plants can provide a relatively steady supply of electricity and could support industrial zones where factories require continuous power. Vietnam has set a target of generating roughly 10% of its electricity from LNG by 2030. At present, however, gas accounts for only around 1.6% of the country’s electricity generation.
Progress towards the LNG target has been slow. Vietnam’s largest conglomerate, VinGroup, abandoned a proposed $6.7 billion LNG power project in March, citing the high cost of the undertaking. Several other LNG projects have also faced delays, while many of those still moving ahead involve state-owned companies, including Vietnam Electricity, or EVN.
The economics of imported gas have become even more difficult because of international energy prices. The Iran war has contributed to a sharp rise in LNG prices for Asian buyers, with import costs increasing by 146% since the end of February, according to the report. Phillip Solomon of consultancy BRG estimates that importing LNG at the scale envisaged under Vietnam’s 2030 plans could cost the country between $14 billion and $18 billion annually at current prices. That would represent a substantial share of Vietnam’s foreign-exchange reserves.
However, high global prices are not the only obstacle. Vietnam’s domestic electricity market is heavily subsidised, with state-owned power producers required to provide electricity at relatively low prices. The system has allowed the government to keep electricity prices under tight control, but it creates difficulties when expensive imported LNG is introduced into the power mix.
Developing a large network of LNG-fired plants would also require considerable investment and technical expertise. The Vietnamese state may not have the financial capacity to shoulder the entire burden, making private and foreign investment important. Foreign energy companies, however, generally seek electricity prices that can provide adequate returns on their investments, potentially conflicting with Vietnam’s preference for keeping power prices low.
The country has faced similar challenges in the renewable-energy sector. In 2017, Vietnam successfully attracted foreign investment into solar power by offering generous feed-in tariffs, which guaranteed producers a set rate for the electricity they supplied. While the policy helped trigger substantial investment, the cost eventually became difficult to sustain. EVN subsequently reduced the returns associated with those investments in 2025, affecting projects involving about $13 billion in investment.
The experience has raised concerns among some foreign energy developers about the predictability of Vietnam’s electricity market. For the country to achieve its high-tech ambitions, it will need not only more electricity but also a power market capable of attracting the enormous investment required to generate and distribute it.
Vietnam therefore faces a delicate balancing act. Maintaining inexpensive electricity is important for manufacturers and consumers, while high-tech industries require dependable and increasingly larger amounts of power. LNG could help bridge that gap, but imported gas is expensive and requires major infrastructure investment.
The country’s efforts to become a high-tech manufacturing hub will ultimately depend on whether it can resolve this energy dilemma. As wages rise and the advantages of low-cost manufacturing gradually diminish, Vietnam is looking towards more sophisticated industries for its next phase of growth. Ensuring that factories have reliable, affordable and sustainable electricity could prove just as important to that transition as attracting technology companies and developing skilled workers.
