Electronic giants pioneer Vietnam’s support industry

Intel is believed to have started the second wave of foreign investment in Vietnam when it built a US$1 billion chip manufacturing facility in Ho Chi Minh City back in 2010 but it was Samsung who sealed the deal.

The Republic of Korean technology giant has methodically moved its manufacturing base to Vietnam away from China and currently contributes up to nearly 20% of the total export turnover of Vietnam.

In recent years, international giants such as Intel, Canon, Panasonic, Fujitsu, LG, Bosch and Nokia have followed suit pumping billions of US dollars into the Vietnamese electronics industry.

Samsung has injected billions of US dollars into smartphone production plants in the country, principally in the Hanoi metropolitan and surrounding areas paving the way for Vietnam to become a leading production base for the industry.

As many as 120 out of 400 million Samsung mobile phone items have been produced in the northern province of Bac Ninh alone. More recently, Samsung constructed another factory in the northern province of Thai Nguyen.

Foreign investors consider the development of the support industry as a vitally important factor in the sustainability of the electronic industry by sharpening the competitiveness of the sector.

However, recently a few leading economists have raised concern that somehow the lack of raw materials and component parts currently available in country, may lead to an overreliance on imports for these items and impede national economic growth.

Canon Vietnam Director General Katsuyoshi Soma doesn’t see that there is a problem however. Soma said his company currently operates three factories in Vietnam and at present utilises roughly 65% domestically-produced raw materials.

The company has been forced to import almost all electronic components, such as semi-conductors, molds and precision mechanical components because they are currently unavailable in country, but is confident the support industries will develop with time.

A representative from Panasonic Vietnam Co. Ltd in turn shared the same views as Soma saying the country’s support industry is still in its infancy but offers tremendous opportunity for future growth.

The government has also taken the vanguard and has created a business climate conducive to our needs with many attractive investment incentives, the representative added.

Dr. Vo Tri Thanh, Vice Director of the Central Institute for Economic Management (CIEM), also said he does not think development of the support industry poses a monumental challenge either.

Thanh cites the case of the motorbike support industry as a case on point. In the early 2000s, the industry gained significant success in providing spare parts for motorbike assembling despite fierce competition caused by imported products from China.

However, at present, more than 90% of input materials for Honda Vietnam – one of the biggest motorbike producers – are being produced in the domestic market.

In his view, it is both in the interest of the foreign investors and the country to develop an in country support industry for the electronics industry.  For its part the government is on the right track providing more incentives for investment.

Particularly, the government should give priority for multinational groups who commit to nurturing technology transfer to help Vietnamese small-and-medium-sized enterprises (SMEs).

Furthermore, Thanh said following the lead of the international giants and the government, the electronics sector provides many excellent opportunities for those pioneering Vietnamese SMEs to get into the industry and to achieve success.