Local industries spin-off component producers

The trend of large-sized foreign electronic and telecommunications production groups to choose Viet Nam as their production base for global exports is expected to help the country develop supporting industries.

Although the Government has taken a variety of measures such as setting up required localisation ratios and tax incentives to encourage the development of supporting industries over the past 15 years, the results have remained modest.

Previously, only small-sized foreign electronic and telecommunications manufacturers based in Viet Nam targeted the domestic market, which remained very small. These manufacturers only consumed several hundreds of thousands of components annually, that is why they were unable to attract other foreign component producers to set up supporting factories in Viet Nam.

However, the situation has changed over the last five years with the country beginning to see a flow of large-sized projects thanks to its advantages in political stability, attractive investment climate and cheap labour force.

Large-sized foreign electronics and telecommunications manufacturers including Nidec, Canon and Sanyo have chosen Viet Nam as their production bases, followed by the US, South Korean and Taiwanese groups of Intel, Foxconn and Compal.

Once the industry big-players established production bases in Viet Nam, they brought component producers in their wake. Japanese Meiko, for example, runs a US$300 million electronic components project. Japanese-owned Hoya, capitalised at $100 million, makes components for computer hard disks and music players.

Most electronics groups have established their factories in the northern provinces of Bac Ninh and Vinh Phuc and the southern provinces of Binh Duong and Dong Nai, together with Ha Noi and HCM City.

Recently, Samsung, with the opening of the $670 million mobile phone production factory in the northern province of Bac Ninh, became the latest to help Viet Nam attract foreign supporting producers to the country. The Samsung factory, currently capable of producing 18 million mobile phones per annum, will increase production to 100 million after a year. Export revenues are predicted to reach $5 billion, making it the second largest Samsung factory in the world after its facility in China.

The project’s significance is not only the $5 billion worth of exports each year, or even the 10,000 jobs created, but also the boost it will give to developing the country’s supporting industries.

According to deputy general director of Samsung Electronics Viet Nam, Nguyen Van Dao, said that following the opening of the Samsung plant, as many as 17 supporting producers have followed Samsung to Viet Nam with a total investment capital of $300 million. The plant is expected to attract at least another 30 satellite investors to the country. Satellite enterprises will provide components and play a vital role in making Samsung’s Viet Nam products more competitive in the world market. Samsung Electronics Viet Nam said that half of the components needed for its products would be made by satellite businesses in Viet Nam by the end of this year.

VietNamNet/VNS

Tags: Vietnam industry, Vietnam Local industries