Electronics industry seeks larger share of global supply chain

This year marks breakthroughs for the Vietnamese electronics industry, including the shifting production of electronic components from international markets to Vietnam. The establishment of the Vsmart smartphone manufacturing factory and the signing of the EU-Vietnam Free Trade Agreement (EVFTA) promise to open up opportunities for the Vietnamese electronics industry. At the Vietnam Electronics Forum 2019, themed “Linkage and dialogue between enterprises in the global supply chain”, Nguyen Thi Xuan Thuy from the Ministry of Industry and Trade’s Industry Agency said that when the Vietnamese electronics industry builds a network of domestic suppliers with global competitiveness, it would help limit risks, reduce delivery time and save costs.

Trade tensions between the US and China have created conditions for Vietnam to receive FDI inflows from investors seeking to shift their production from China to the Southeast Asian region in order to limit risks, with Vietnam featuring prominently on their radar. This has provided an opportunity for Vietnam’s electronics industry to join the global supply chain.

With the largest turnover and market share growth of electronic exports in ASEAN, Vietnam has grown to become the 12th largest electronics exporter in the world and the third largest in ASEAN. However, the Vietnamese electronics industry still faces many challenges. Most of the export value (95 percent) is created by the FDI sector, while domestic firms are not strong enough to participate in the global supply chain.

The majority of businesses operating in the electronics industry are small- and medium-sized enterprises. Ron Ashkin, director of the United States Agency for International Development (USAID) LinkSME program, said only a few Vietnamese small- and medium-sized enterprises are able to participate in the supply chain for foreign businesses. He attributed the problem to the use of outdated technologies, low labor productivity, lack of experience in working with foreign companies, and weak financial access.

Do Thi Thuy Huong, a member of the executive board of the Vietnam Electronic Industries Association (VEIA), said Vietnam needs to focus on improving competitiveness and seeking measures to support businesses, especially those in the electronics industry. In addition, improving productivity and the business environment, promoting linkage of domestic supply chains, and strengthening connections between domestic businesses and FDI companies are extremely important, she said.