Vietnamese electronic producers disappearing on the market

Foreign electronic enterprises only seek profits when they come to Vietnam, while they do not intend to help develop supporting industries or transfer technologies. Meanwhile, domestic enterprises are still weak. This explains why Vietnam’s electronic industry remains behindhand.

Foreign manufacturers flock to Vietnam…

According to the Vietnam Electronics Enterprises’ Association, a lot of big foreign investment projects in the field have been registered in Vietnam, totaling billions of dollars.

Right after Vietnam officially became WTO’s member, the US Intel Group raised its investment capital in Vietnam from 600 million dollars to one billion dollars. Meanwhile, Japanese Nidec injected one billion dollars in the project in Binh Duong province.

Taiwanese Foxconn has invested five billion dollars in Vietnam, while electronic part production projects alone have the investment capital of one billion dollars. Japanese Meikom has spent 300 million dollars on the project on making electronic parts in Ha Tay.

Prior to that, in 2008, South Korean Samsung Group set up a mobile phone production factory in Bac Ninh province with the investment capital of 670 million dollars. Most recently, Bac Ninh’s authorities have announced that they have granted the renewed license on Samsung Complex with many special preferences. This could be seen as an important step for the investor to increase the investment capital of the project from 670 million dollars to 1.5 billion dollars in the time to come.

If so, Samsung would become the leading investor in the field of electronics and home appliance production in Vietnam.

In early 2011, Finnish Nokia Group signed an agreement on long term land leasing with Bac Ninh VISP to set up a mobile phone production factory, capitalized at 280 million dollars.

According to Tran Quang Hung, Secretary General of the Vietnam Electronics Enterprises’ Association, it is a growing tendency that international manufacturers relocate their factories from China and South Asian countries to Vietnam.

It is because Vietnam still has a big land fund with land plots in advantageous positions, favorable for production and shipping. Meanwhile, the labor cost in Vietnam is also cheap, and investors are being offered big incentives, because Vietnam considers electronics production as hi-tech industry. Meanwhile, the land leasing fee and labor cost in China and Malaysia have been increasing significantly.

…but their presence cannot help

Most of the foreign groups come to Vietnam just to use Vietnam’s land and workers. They have not used local materials, while they have been simply importing parts and accessories to assemble. Therefore, the added value of the products assembled in Vietnam remains low.

In 2010, Vietnam exported 3.4 billion dollars worth of electronics, but the added value was just 5-10 percent.

In order to build up an electronics industry, Vietnam needs to have high quality designers. However, it still does not have.

Over the last 10 years, foreign manufacturers have not trained designers. They only trained the workers who manage the production lines, complete products and provide warranty services.

Domestic enterprises disappearing

While more and more foreign manufacturers appear in Vietnam, domestic enterprises have disappeared.

Viettronics Dong Da, Tan Binh, Thu Duc and Bien Hoa, the once well known brands, have nearly disappeared on the market. Many Vietnamese manufacturers now struggle to survive by leasing workshop premises, selling mobile phone simcards, or leasing production lines.

Vietnam cannot make electronic products from A to Z, while it also cannot make electronics parts. The things that can be made in Vietnam include carton boxes, introduction books and plastic covers for TVs and computers. They are all simple products and do not have high values.

Some experts believe that if Vietnam had not opened its doors so widely to foreign investors, and if it had created favorable conditions for Viettronic brand to develop, Vietnam’s electronics industry would be able to develop well.

Foreign manufacturers come to Vietnam, but they do not promise to develop supporting industries and increase the localization ratio. Especially, Sony did not develop its own factory, but used the TV assembling lines of Viettronic Tan Binh. Later, Sony has withdrawn production from Vietnam after it successfully built up the distribution and maintenance system which serves its plan to import foreign products for domestic consumption. – Vietnamnet

Tags: Vietnam Electronics Industry