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Fortune 500 companies pose competition in Vietnam's process manufacturing sector

Annjil Chong, DIGITIMES Asia, Taipei 0

Credit: AFP

With companies shifting their business from China to Vietnam, Vietnam's process manufacturing sector has attracted US$252 billion in foreign direct investment (FDI) and accounts for approximately 60% of the Southeast Asian countries.

Vietnam is not only a technological powerhouse but also a battlefield right now.

To date, there are 34,898 valid FDI projects worth US$426.14 billion in Vietnam, based on the statistics from the Foreign Investment Agency under the Ministry of Planning and Investment.

More particularly, Vietnam attracted FDI with a total of US$16.03 billion in 1H22. The process manufacturing sector accounted for US$8.84 billion, or 63% of the total.

Vietnam has been attracting Fortune 500 companies such as Samsung, LG, Canon, Honda and Toyota, as indicated by their continual investment in the country.

In addition, Compal's relocation is expected to encourage local electronic component manufacturers to become Compal's suppliers.

Vietnam Investment Review (VIR) reported that more than half of respondents said they would reduce Chinese investment if China's COVID-19 control measures continued throughout 2023, citing a survey of U.S. companies released by the American Chamber of Commerce in China in May 2022.

Investors from Europe, the US, and Japan, including Arevo, Fujikura Fiber Optics, Mabuchi Motor, Premo, and Lixil, are looking for raw materials and intermediate products in Vietnam as the pandemic continues to disrupt global supply chains, said Duong Nguyen Binh, VP of the Vietnam Association of Automation.

He further explained that foreign tech companies have bought more than 400 parts from local suppliers for use in their industries such as power, electronics, precision machinery, 3D printing, robotics, and automation.

Meanwhile, local electronic component manufacturers in Vietnam are also trying to expand their business.

Taking Haast Industry Vietnam as an example, the company is accelerating the construction of the second and third production bases to meet increasing orders from partners. Construction of the second and third facilities is expected to be completed by the end of 2022 and 2023, respectively.

Haast Industry is one of 14 local suppliers supported by Samsung Smart Factory in partnership with Vietnam's Ministry of Industry and Trade (MoIT). The company builds its first production facility in 2019 and gained more new business opportunities as the global tech group moved from China to Southeast Asia.

However, due to a lack of experience and production capacity, the production cost of components in Vietnam is two or three times that of neighboring countries.

Even with the cooperative program, local component suppliers in Vietnam still face difficulties competing with Fortune 500 companies and importing goods.

Recently, Toyota Motor Vietnam and the Vietnam Industrial Bureau, a unit under MoIT, signed a memorandum of cooperation to update their plan for strengthening local supporting industries in Vietnam.

Since then, Toyota has been checking up on suppliers with a new program that sends experts over to their facilities. They're helping out to improve efficiency and leading by example.