Japanese parts makers are increasing investment in Vietnam to cut short their reliance on China in case of risks caused by possible revaluation of RMB, surging labor costs and deteriorating power shortages. High-quality labor, low employment costs, and an average wage almost half that in China has encouraged Japanese manufacturers to expand investment in Vietnam by 50% to approximately US$100 million in fiscal 2004, about 2% higher than the Japanese companies' investment in China.

With plans to invest about US$1 billion by 2010, Nidec intends to build two factories in Vietnam by late 2005 for producing PC-use motors and optical parts. Nitto Denko plans to start producing flexible printed circuit boards for handsets in Southern Vietnam. Both NEC and Toko are considering to shifting part of their China production to their Vietnam plants.