Challenges for electronics support industries

14:06 | 06/10/2015 Industry

(VEN) - The Vietnamese electronics industry has grown about 10 percent annually, offering opportunities for domestic businesses to invest in electronics support industries. However, support industry investors have to cope with big challenges.

Challenges for electronics support industries

The Vietnamese electronics industry has attracted large groups with global supply chains such as Samsung, Nokia, LG, and Canon, and achieved impressive growth in recent years.

According to the General Statistics Office under the Ministry of Planning and Investment, the export value of the electronics industry has rapidly grown in the last four years, from US$6.9 billion in 2011 to US$29.5 billion in 2012, US$32.1 billion in 2013, and US$35 billion in 2014.

Large groups want to increase the local content of their products to reduce imports when investing in Vietnam. Samsung is an example. Since 2014, the Samsung Group has organized many exhibitions to introduce Vietnamese businesses to support industry-related products for which it has demand, in an effort to seek local investors.

Do Thi Thuy Huong, member of the Vietnam Electronic Industries Association Executive Board, said that with the presence of global electronics groups, Vietnam was becoming one of the world’s largest mobile phone, printer and photocopier manufacturing centers, creating great opportunities for domestic businesses to cooperate with foreign companies in manufacturing electronics support industry-related products to become part of global value chains.

Pressure from FDI companies

In the opinion of economists, to be part of global value chains of large groups, Vietnamese businesses need to cope with challenges. According to Do Thi Thuy Huong, the first challenge is that the added value of domestic electronic products remains low and most kinds of materials still have to be imported. In 2014 Vietnam exported over US$32 billion worth of electronic products but spent more than US$28 billion on material imports.

To become suppliers of support industry-related products for large groups, domestic businesses need to fiercely compete with companies with foreign direct investment (FDI). For example, the Samsung Group has brought to Vietnam more than 40 support industry-related product manufacturers from the Republic of Korea (RoK). RoK manufacturers have advantages in terms of technology and experience while Vietnamese businesses are weak in technology and financial capacity. This is why among 60 component suppliers for Samsung, 45 come from the RoK, 10 from other countries, and just five from Vietnam.

Clearly, it’s not easy for Vietnamese businesses to become partners manufacturing support industry-related products for large groups. If they lack their own investment and serious efforts as well as the support from relevant state authorities, domestic businesses will struggle to become part of global value chains.

FDI companies account for just one third of the total number of businesses in the Vietnamese electronics sector but create as much as 90 percent of its export value.

Nguyen Hoa