Supporting industry firms should grasp opportunity to join global supply chain

Ms. Le Nguyen Duy Oanh, Deputy Director of the Supporting Industry Development Center under the Ho Chi Minh City Department of Industry and Trade, said that this conference attracted the participation of many large global FDI corporations such as Samsung Electronics Vietnam, Techtronic Tools Vietnam (TTI), Panasonic Vietnam,  BOSCH Vietnam, Konica Minolta Business Solutions Vietnam and Platinum Company.

These corporations have provided more than 700 detailed lists of components for supporting industry products that need to be sourced locally. On that basis, the organizer arranged more than 300 direct connections for 20 FDI enterprises and terminal supporting industry manufacturing enterprises with more than 120 potential Vietnamese supporting industry suppliers to join the supply chain.

A representative of TTI Group disclosed that the group has built a strategy to find 200 domestic supporting industry suppliers from now to 2025 to meet the production needs and expansion of three factories in Ho Chi Minh City and the Southern Province of Dong Nai. Products to be supplied are very diverse from motors to screws, boards, switches, machines, mechanical processing, aluminum casting, springs, and power cords.

Up to now, 80 domestic enterprises have become direct suppliers to TTI Group, with the ability to meet 40 percent of the demand for supporting industry products while 60 percent of the remaining must be imported from China and the United States. Similarly, Samsung Group targets to find 250 first-level suppliers of supporting industry products, but the group is continuing to search because the group has so far sought less than 100 enterprises.

Generally, many FDI enterprises confirmed that domestic enterprises have made many strides in supplying good supporting industry products. Not only the quality and price of the products are suitable, but the variety is also more diverse. Moreover, local firms have been providing simple products, a low added value such as screws, plastic frames, packaging, paper boxes, multi-detail products, component assemblies, and value-added products increased to serve the groups of electricity, electronics, and medicine.

Statistics from the Ministry of Industry and Trade show that, in recent years, the supporting industry in Vietnam has been making positive changes, with about 2,000 enterprises producing spare parts and components. Amongst them, roughly 300 enterprises have been participating in multinational supply chains, creating jobs for more than 600,000 workers. It is estimated that the number of enterprises operating in the field of supporting industry accounts for nearly 4.5 percent of the total number of enterprises in the processing and manufacturing industry.

On the contrary, many economic experts believed that Vietnamese companies in the field of supporting industry are still weak compared to the increasing demand for FDI enterprises, especially in the context of the investment wave of foreign enterprises pouring into Vietnam. This comes from the fact that the production scale of domestic enterprises is still small and investment capital is still weak.

In addition, supporting industry enterprises face many difficulties including a lack of investment land funds with reasonable preferential policies and difficult access to low-interest loans. Worse, many FDI enterprises are not ready to transfer technology to domestic enterprises.

Mr. Tran Ba Linh, Production Director of Dien Quang Lamp Company, said that in order to become a supplier of supporting industry products in the electricity and electronics industry, the company had to invest in innovation in its management system. management, and production lines in combination with training human resources. Specifically, to produce and process electronic boards, the company has invested in equipment such as Panasonic Smart Factory version gluing machine with 2 robotic arms. Accordingly, each arm has 16 suction heads, gluing speed of 86,000 chips an hour. With this gluing machine, it is possible to paste from the smallest components to components up to 1.2m in length.

In addition, the company has bought thickness testers, drying ovens, and machines to check the accuracy and completeness of all components on each board… Especially, in mid-2022, Dien Quang Lamp Company signed a strategic cooperation agreement with Xelex - a firm that has a team of good experts, capable of research and development to deploy and produce high-difficulty electronic devices such as tablets, laptops, and computers. Sharing with enterprises' concerns, Mr. Vo Van Hoan, Vice Chairman of the People's Committee of Ho Chi Minh City, affirmed that over the years, organizing conferences to find supporting industry suppliers has attracted 96 FDI enterprises and manufactured industrial products as well as connected 370 supporting industry enterprises in the city and provinces with suitable products.

There has been an increase in the number of buyers, and sellers and they met each other year by year at the conference held by city authorities. Many of them have made a breakthrough and have been able to become suppliers for terminal FDI enterprises.

Regarding helping domestic enterprises to increase their internal resources, the southern largest city is currently speeding up the progress of establishing a specialized industrial park for the supporting industry. In addition, the southern metropolis has been increasing loan sources with preferential interest rates for enterprises to expand their factory size, participate more effectively in global supply chains, and create incentives to encourage enterprises to actively innovate technology, and improve advanced production techniques.

Vice President of Vietnam Association of Supporting Industry under the Ministry of Industry and Trade’s Institute of Industry and Trade Policy and Strategy Truong Thi Chi Binh, said that in order to speed up the development process for enterprises producing supporting industry products, Ho Chi Minh City in particular and Vietnam, in general, need to plan and build a high-tech supporting industry park. This industrial park must ensure three factors namely suitable rent and lease area for firms’ production scale, preferential policies on land rent, tax exemption and reduction attached to stimulate investment plus investment criteria transparency and ready logistics services to facilitate business operations.