14:26 | 05/04/2015 Investment
(VEN) - Ho Chi Minh City’s microchip industry has achieved big successes in recent years and is regarded as the cradle of the Vietnamese semi-conducting microchip industry, helping Vietnam rank third among Association of South East Asian Nations (ASEAN) countries in the field of microchip design. However, by contrast the city’s electronics industry has faced difficulties and growing competition.
Domination of foreign businesses
Currently, 30 investment projects in the field of electronics are ongoing in the Saigon Hi-tech Park with total registered capital of US$1.7 billion. These include 16 foreign invested projects with total registered capital of US$1.3 billion, and 14 domestic projects valued at US$392 million. In export-processing and industrial zones, 44 electronics projects are ongoing with total registered capital of US$1.3 billion, including 30 foreign invested projects with total registered capital of US$1.2 billion. Most domestic electronics companies based in the city’s districts have stopped operations.
Since 2001, companies with foreign direct investment (FDI) have contributed over 90 percent to the revenue of the city’s electronics sector (91.26 percent in 2014). The export value of hi-tech products such as computers, electronic products and components, and digital technology products has rapidly grown. These products have become major exports for Ho Chi Minh City and have been exported mostly by FDI businesses such as Samsung, Hitachi, Intel, and Sanyo.
While FDI businesses dominate the city’s electronics market, domestic companies contribute a mere 8.74 percent to the sector’s revenue. In recent years, many domestic electronics companies have dissolved due to the costly import of foreign-made components for domestic assembly.
Ho Chi Minh City Department of Information and Communications Deputy Director Le Quoc Cuong said that domestic electronics businesses were mostly small to medium in size and their skills and productivity remained low. Their brands had also failed to win customer trust. Very few domestic businesses are capable of manufacturing products of high economic value. Domestic businesses also have limited access to capital sources and market information as well as little production space, hindering their efforts to expand production, promote technological innovation and invest in product research and development.
Boosting the domestic electronics industry
Ho Chi Minh City People’s Committee Vice Chairman Le Manh Ha said that to boost the domestic electronics industry, the committee had assigned the municipal Department of Information and Communications to identify key products of the electronics industry so that suitable policies could be applied to support the sector’s development. Special attention will be paid to building microchip plants and promoting electronic software and information technology development. Information exchange channels between FDI businesses and domestic suppliers will be established. Domestic manufacturing of support products will be expanded to raise the local content of domestic electronic products so that they can join global value chains.
In August 2014, Prime Ministerial Decision 1290/QD-TTg was promulgated, indicating the action plan for developing the electronics industry to implement Vietnam’s industrialization strategy in the framework of Vietnam-Japan cooperation towards 2020 with a vision to 2030.
This action plan aims to create breakthroughs in investment attraction and improving the effectiveness of FDI and Japanese investment in particular into the Vietnamese electronics industry. Under this plan, Vietnam intends to pursue the goal of becoming a large electronic equipment manufacturer using new, smart and environmentally-friendly technologies.
Suitable policies will be applied to offer tax and credit preferences for support industry businesses to expand production. Greater attention will be paid to developing human resources for the electronics sector. Businesses, research institutes and training organizations as well as state management authorities should cooperate in training highly skilled human resources meeting business requirements.
The Vietnam Posts and Telecommunications Group (VNPT), the Vietnam Military Telecommunications Group (Viettel), the Vietnam Electronics and Informatics Joint Stock Corporation (VEIC), the Saigon Industry Corporation, and other businesses operating in the fields of electronics industry and electronics support industries need to take the initiative in preparing specific plans and projects for investment.
By Do Ngoc