Vietnamese electronics industry in desperate need

According to the Central Institute of Economic Management (CIEM), since 2015, Vietnam has been the 12th-ranking electronic exporter over the world and the third-ranking in the ASEAN. The export turnover of the electronic sector shows significant results. It is expected to exceed US$70 billion in 2017 and enable Vietnam to become one of the largest countries exporting electronic products worldwide.

Out of the ten largest electronic projects in Vietnam since 2003, Samsung ranks first with four manufacturing complexes and a total registered capital sum of over $17.3 billion, followed by projects of Inter, LG, Canon, Nokia, Panasonic, but no large-scale projects by Vietnamese enterprises.

Despite the country’s rising exports, Vietnamese electronics producers are still weak. Companies like Vietnam Electronics and Informatics Corporation (Viettronics) and Hanel Corporation mainly import SKD (semi knocked down) and IKD (incompletely knocked down) units to assemble and meet urgent market demand. Developing without long-term strategy, the Vietnamese electronics market is in serious imbalance now.

There are 610 electric and electronic components producers nationwide, accounting for 53.28 per cent of the total electronic sector’s businesses—a disconcertingly low proportion. Almost all Vietnamese businesses deploy sporadic orders, providing materials and simple components, such as packaging, plastic spare parts, metal, and logistics services such as transportation and sanitation. They have not been able to manufacture important components with higher added value yet. Almost all electronic products are assembled from imported components.

Nguyen Duc Cuong, sales manager of Sunpla Corporation, said that the partners of Vietnam’s electronic supporting enterprises come from Korea and Japan. Co-operating with Korean partners, Vietnamese enterprises often sign contracts with Samsung or LG’s subcontractors. Therefore, Vietnamese firms do not know specific plans and are stuck carrying out contracts of sporadic orders.

With Japanese partners like Canon and Brother, Vietnamese businesses sign contracts for a series of products for a relatively long time. However, these contracts, along with indirect contracts with subcontractors, are relatively few in number. Additionally, the linkages between domestic enterprises are very weak.

Strengthening linkages

Bang Hyun Woo, deputy director general of Samsung Vietnam, said that Vietnamese companies produce more sophisticated components rather than just packaging and palletising. The localisation rate of Samsung mobile phones was 57 per cent at the end of 2016. As many as 29 Vietnamese firms are direct suppliers for Samsung now.

Samsung has been doing their utmost to seek out and support Vietnamese firms to take part in its supply chain. However, Vietnamese businesses have to raise their knowledge by inviting experts who have long experience working with Korean and Japanese firms.

“The linkage between domestic and foreign invested enterprises has been improving, but is still weak,” said Do Thi Thuy Huong from the Vietnam Electronic Industries Association (VEIA). 

"Almost all Vietnamese electronic enterprises are small- and medium-sized, and it is hard to make large investments to meet the high demands of foreign invested firms."