Electronics firms: Offer limited content to foreign manufacturers

Policies encouraging the domestic support industry to improve technological and management capability are needed

At the recent 2017 Vietnam-Japan Supporting Industries Exhibition, Deputy Japanese Ambassador to Vietnam, Jun Yanagi, said 1,600 Japanese enterprises are operating in Vietnam, half of them are manufacturing companies, but Vietnamese components only account for a small percentage of all parts bought by Japanese producers.

Hironobu Kitagawa, Chief Representative of the Japan External Trade Organization (JETRO), agreed that difficulties in purchasing domestic parts and components remain a big problem for Japanese companies in Vietnam. In 2016, Japanese manufacturers in Vietnam bought 34.2 percent of all parts and components they needed from Vietnamese companies, compared with 67.8 percent in China, 57.1 percent in Thailand and 40.5 percent in Indonesia. The problems facing Vietnamese support industry enterprises will be exacerbated by the fierce competition expected from neighboring countries as soon as the ASEAN Trade in Goods Agreement (ATIGA) takes effect in 2018 and reduces or zeroes out tariffs, the JETRO Chief Representative said.

Le Nguyen Anh Tuan, director of the Loriot Co., Ltd, said increasing local content without depending on foreign suppliers would be extremely difficult, as domestic producers lack the capacity to meet demand. “Thailand, the Philippines and China have gone ahead and a long way in support industry product manufacturing, and they are capable of churning out those products at reasonable and low costs. Vietnamese producers will fail if they cannot create a difference,” Tuan said. Nguyen Nam Hai, deputy director general of the Directorate for Standards, Metrology and Quality, said domestic electronics enterprises need to improve their capability, especially technological capability, if they are to join global supply chains. They also need measures to manage product quality in order to ensure stable, high quality and reasonable prices, Nguyen Nam Hai added. Electronic products have a short life span so improving productivity and product quality is important, Nguyen Nam Hai said.

According to the Ministry of Industry and Trade’s Industry Development, while electronic component and part production requires high technology, Vietnamese enterprises remain technologically weak. Therefore, the state should formulate policies to facilitate technology transfer by helping support industry enterprises and assemblers improve production capacity and administration, and join production chains of foreign direct investment (FDI) enterprises.