Electronic circuit board produced at Nexcon Vietnam. There were significant opportunities for electronics part-supply industry to make a change amid a global production shift. (Photo: VNA)
This current trend is a call for enterprises to innovate and integrate intoglobal supply chains.
The association's Deputy President Do Thi Thuy Huong delineates a somewhatuneven development within the electronics support sector. She reveals that asubstantial 73% of exports are phone-related. Following closely are integratedcircuits, pivotal in the manufacturing of computers and peripherals. These formthe backbone of Vietnam's electronics supporting industry.
Over the past ten years, the electronics sector and its ancillary industrieshave played a significant role in boosting Vietnam's export turnover,accounting for more than 30% of the nation's export value in 2021-22.
The industry's impact is not only felt in export numbers. It also contributedto a healthy balance of trade for Vietnam.
In 2021, the country reported a trade surplus of 4 billion USD, with theelectronics industry contributing a substantial surplus of 11.5 billion USD.Although a slight downturn was noted in 2022 with figures of 11.2 billion USD and11.24 billion USD, respectively, the industry's role in assuring a balance offoreign exchange and trade for Vietnam remains undeniable. This noted downturnis attributed to a global economic slowdown experienced in 2022.
Huong said that the COVID-19 pandemic and conflicts between major economieswere reshaping the global supply chain. However, firms must make drasticefforts to enhance competitiveness to grasp the opportunities from the globalproduction shift.
The association said that enterprises operating in the supporting industry weremainly of small and medium size with limited capital and human resources,citing statistics that those with capital of below $1 million accounted for 26%and $1-5 million 26%.
Although there were significant improvements in recent years, such as more than200 Vietnamese firms becoming suppliers for Samsung, the electronics supportingindustry was facing considerable challenges.
The first challenge was that policies failed to keep pace with development.
Changes in consumption habits and behaviours required Vietnam to adjustpolicies in supporting enterprises and attracting foreign investment to ensurea high-quality foreign investment inflow. However, the adjustments were nottimely enough.
Vietnam was also at risk of lagging behind the rapid development of Industry4.0, forcing enterprises to shift to innovation-driven development, especiallyin the context that cheap labour and the availability of natural resources wereno longer advantages, she said.
Besides, there were serious shortages of skilled workers, capital andtechnology to receive advanced technologies value transfer from FDI inflow.
Climate change and unsustainable resource exploitation were also having astrong impact on Vietnam’s sustainable development goals.
According to the Ministry of Industry and Trade, the digital transformation atVietnamese enterprises operating in the electronics industry was happening at alow speed. Most firms used computers but at the level of normal applicationsand lacking in-depth applications. Around 20% of the total number of firms werewilling to invest in digitalisation.
In 2023, although the world economy was in a mild recession and inflation waspassing its peak, it was now the time when businesses and people felt itsimpact the most, the association said. Commodity prices fell, but consumerdemand did not increase, especially for electronics products.
Of note, after the COVID-19 pandemic, new consumer habits and behaviours werebeing formed with a preference for online shopping and more attention to thepractical application of electronic products and devices.
Huong said that firms should use these changes to adjust their productionorientations and capacity.
Vu Trong Tai, general director of RX Tradex Vietnam, said that there wereopportunities and challenges intertwined, urging firms to make fast transitionsto take the opportunities.
The global production shift was creating opportunities for enterprises toparticipate in the global supply chains and increase added value as well as forVietnam to attract more FDI.
The enforcement of new-generation free trade agreements, including theComprehensive and Progressive Trans-Pacific Partnership (CPTPP) and the EU – VietnamFTA (EVFTA), also created favourable conditions for trade and investment inhigh-tech industries, especially electronics.
Tai pointed out that the challenge was that most of Vietnam’s supportingindustry was of small and medium size firms, so their production was fragmentedwith low technology, limited productivity and quality not up to requirements.
Meanwhile, the supply chains had not been established firmly and synchronisedand remained discrete.
Opportunities came quickly but passed quickly. India was growing rapidly withthe plan to regain its position as a leading manufacturing hub from China.
It was a good time for Vietnam to promptly make innovations to embrace theopportunities and accelerate the digitalisation process while the Governmentneeded to timely adjust policies to promote the development of supportingindustries and enable enterprises to participate in the global supply chains inhigher tech positions./.
VNA
