Component makers display intent to establish networks

Vietnam is well-placed to take on more facilities involving the manufacturing of spare parts and various components, Photo: Le Toan

Representatives of more than 300 domestic and foreign manufacturers attended the Vietnam Global Manufacturing Forum 2024 organised in Hanoi late last month to explore business cooperation options.

Delegates of foreign-invested enterprises in electronics, manufacturing, and industrial real estate operating in Vietnam were present, coming from Japan, South Korea, China, and Singapore. Vietnamese vendors in manufacturing electronic components, semiconductors, and equipment were also involved, including Goertek Vina, Heesung Vina, Le Mont Investment, and BW Industrial Development.

Le Anh Dung, general director of event organiser A+ Industrial Real Estate, said, “During meetings with investors, I see that the trend to relocate the operation of electronics components and spare parts suppliers from China will continue, and Vietnam is one of the highly recommended destinations. In addition, the world’s most renowned manufacturers such as Samsung, LG, Panasonic, Intel, and Amkor have long-term expansion plans in the country.”

A report from HSBC released in September 2023 showed that more Chinese exports have been going to Southeast Asia than the United States and Europe. Exports from China to ASEAN have reached nearly $600 billion a month based on 12-month moving averages compiled by the bank, surpassing the bloc’s shipments to the US and Europe since earlier in 2023.

This shift is partly because parts sourced from China are getting shipped to Southeast Asia for final assembly before getting reexported to their final consumer destinations-like the US.

“Suppliers of the above groups are not only simply expanding their operation in Vietnam but also establishing a smart production ecosystem for the electronic components, spare parts, and semiconductors in the country, and they want domestic vendors to be an important link in their supply chain. Thus, one of the concerns impacting their decision is whether Vietnam can provide a large volume of high-quality local vendors,” Dung said.

The basis of the investment wave is that Vietnam has become a comprehensive strategic partner of the US and Nvidia has chosen Vietnam as a new base in chip and semiconductor production and support human resource training for this field.

OpenAI’s ambitious global plan includes spending $5-7 trillion for the development of semiconductor graphics chips and restructuring of the semiconductor manufacturing industry. These huge plans have triggered a series of investment waves around the world.

In addition, top aviation and aerospace tech manufacturing corporations such as Boeing and Airbus are also interested in Vietnam and are continuing to consider relocating component production facilities in the country.

Wu Ling Yun, general director of Sunrise Big Data Company, said, “Many people tell me that China has a significant advantage in low-cost parts and components, so if they move to Vietnam, they ask whether they should just import from China to Vietnam, instead of finding domestic suppliers.”

According to Yun, when businesses set up factories in Vietnam and then still import components from China, it would take a lot of time for shipping and custom declaration, in collaboration with cost for taxes and shipping fees. Instead, they can choose domestic vendors to facilitate production operations. In addition, these manufacturers also want to diversify their supply sources to reduce the risks.

“Many manufacturers say that Vietnam still has some unfinished links. However, compared to India’s electronics ecosystem, Vietnam is doing much better. Vietnam’s capacity is currently at a fairly average level in the supply chain of foreign-invested enterprises, which is what supporting industries need to focus on now to improve it,” Yun said.

Foreign investors target smarter production chain Vietnam is on a journey to attract investment capital inflow in the smart production chain. On the sideline of the 2024 Vietnam Global Manufacturing Forum, Kenneth Peng, Chinese project sales director of MD Consumer Electric Appliance Vietnam (Midea), told VIR’s Oanh Nguyen about Vietnam’s position in the smart supply chain and the company’s expansion in the country.