Monday, 18 Dec 2017

National development strategy to improve Vietnam electronics industry

Updated at Saturday, 02 Dec 2017, 08:18
The Hanoitimes - A national development strategy with focus on identifying core products and generating breakthroughs should be built to help Vietnam’s electronics industry improve the efficiency, experts said.
At the conference on development of Vietnam’s electronics industry held on November 28, the Central Institute for Economic Management (CIEM) reported though Vietnam is the world’s 12th largest exporter of electronics and the third-largest in ASEAN since 2015, up to 95 per cent of the country’s electronics output comes from foreign-owned enterprises instead of domestic ones.
With Vietnam’s expected 2017 electronic export turnover exceeding US$70 billion, the CIEM noted that foreign companies operating in the country account for the lion’s share of the value, with domestic companies producing relatively little. 
Without a long-term development strategy, Vietnam’s electronics industry would lose significant market share at home.
Without a long-term development strategy, Vietnam’s electronics industry
would lose significant market share at home.
Cao Bao Anh from the Industry Department under the Ministry of Industry and Trade (MoIT) emphasized that the development of Vietnam’s electronics industry had been imbalanced, with consumer electronics such as audio-visual equipment and entertainment facilities dominating the market.
Without a long-term development strategy, the electronics industry in Vietnam would lose significant market share at home, Anh warned.
He also noted that the MoIT found the electronics sector’s overall return on investment to be low, as the national Incremental Capital-Output Ratio (ICOR) coefficient is below that of other countries such as Thailand, Malaysia and China.
The electronics sector has to import about 77 per cent of their products’ added value, meaning that the domestic supply of electronic components is very low. The country produces mainly a few mechanical spare parts and simple components made from plastic and rubber, according to a 2016 survey by the Supporting Industry Enterprise Development Center (SIDEC) quoted by the CIEM.
Research and product design development for Vietnamese enterprises is still weak. As a result, most Vietnamese firms only outsource foreign products, never venturing to develop their own products.
The report also states that first-tier suppliers to the electronics sector are mostly FDI firms.
Household electronics accounts for about 80 per cent of output and about 30 per cent of total revenue. Only 20 per cent of output is comprised of specialized electronics products, according to Nguyen Thi Tue Anh, CIEM’s deputy director.
She also warned that the localization rate of products only reached 20 to 30 per cent, meaning most of the products on the electronics market are now imported completely or assembled with imported components.
Meanwhile, electronics- and electrical appliances-producing FDI enterprises are facing pressure to reduce costs, as the number of supporting enterprises in Vietnam is still very low compared to the number of assemblers, and the quality of products is disputed.
The total mobile phones and accessories produced in the country in 2016 were worth more than $34 billion, with foreign-invested enterprises accounting for 99.8 per cent of the value. This means most FDI enterprises have to import parts from neighboring countries or directly from their country of origin.
In order to improve the efficiency of the electronics industry, Bui Bai Cuong from the Ministry of Information and Communication said that in the future, it is necessary to focus on research and development, define the sector’s development strategy, focus on identifying core products and generate breakthroughs to promote faster and more efficient products.
He also noted that implementation of supporting industry development policies is slow. The industry faces a significant shortage of high quality human resources and lacks investment especially in the electronics industry’s supporting manufacturing sector.
​Minh Tam
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