In order to welcome the wave of investment shifting to Vietnam, Vietnamese supporting industry (SI) enterprises are working hard to improve their capacity, operations and management in order to join the global production chain by supplying raw and auxiliary materials.
A series of terminal international manufacturers such as Panasonic, Bosch, TTI, Samsung, Klaus and TTI are looking for more suppliers to increase their localization rate in order to optimize production and business efficiency. In particular, because Vietnam has successfully controlled the Covid-19 pandemic, many FDI enterprises in the US and Europe are looking for Vietnamese parts suppliers to replace interrupted supply from other countries.
A number of Vietnamese companies have made efforts to improve their capacity in the race to become a vendor for large international corporations. Specifically, in 2019 and 2020, three member companies of the An Phat Holdings Joint Stock Company (APH) implemented consulting programs on the improvement and development of supporting industries provided by the Ministry of Industry and Trade and Samsung Vietnam. APH’s long-term goals are to improve the localization of products, develop high-tech products, expand investment, and enhance its position in the global supply chain.
According to Dinh Xuan Cuong, Vice Chairman and General Director of APH, the company is trying to increase the quantity and content of Vietnamese gray matter in components for phones, cars, motorbikes, printers, washing machines, which requires a thorough investment in capital, technology and human resources.
In terms of technology, the company is proud to be a leading enterprise in Hai Duong Province in modernizing production. It has invested in upgrading its infrastructure to improve productivity and product quality, and its production lines in Hai Duong meet international standards, Cuong emphasized.
Dao Duy Luan, Deputy Director of Systech Technology & Trading Joint Stock Company, said that currently, many companies in Vietnam are becoming suppliers for large corporations such as Samsung, LG, Canon, Meiko, Brother, and Nidec. Guaranteed product quality and price levels will be determining factors for long-term cooperation requiring investment in technology to create state-of-the-art automatic components. Thanks to serious investment, the company now supplies components to about 300 FDI enterprises from Japan and the Republic of Korea, among them major customers such as Samsung, Canon, and Brother.
Supporting industries attractive to investors
Data compiled by various localities indicate that supporting industries are particularly attractive to local and foreign investors. Specifically, according to data from the management board of the industrial parks and export processing zones in Ho Chi Minh City, in the first 10 months of 2020, 23 new projects were registered with a total investment capital of nearly US$141 million, of which 17 are domestic projects with investment capital of more than US$135 million.
Among the FDI projects licensed by Binh Duong Province from the beginning of the year, many are supporting industries, such as the manufacture of aluminum alloy products for Ever Giant International Private Company Limited in Singapore with registered capital of US$20 million, and projects of the Sung Shin Tech Company Limited in Singapore with registered capital of US$30 million. In addition, supporting industry projects in sectors such as electricity, electronics, mechanics, pharmaceuticals and chemicals are also attracting investor interest.
Participation in the global supply chain as well as competition with FDI enterprises in the SI sector requires further efforts of domestic enterprises. According to Le Bich Loan, Deputy Director of the Saigon High-Tech Park Management Board, many enterprises have received requests from foreign investors to become suppliers but not all of them know how to take advantage of these opportunities. Although the current financial capacity, production capacity, technological level, and human resources of Vietnamese enterprises are limited, with determination, efforts and the support of state management agencies, banks as well as buyers, these companies will gradually reach their targets.
The Government recently issued Resolution 115/NQ-CP on goals and measures to boost the development of supporting industries, setting a target of about 2,000 enterprises with sufficient supply capacity. Especially in the context of the Covid-19 pandemic, the investment shift opens a window of opportunity for Vietnam which SI enterprises should not miss.