|Foreign parts manufacturers head to Vietnam as giant firms flock to the country
Foreign parts manufacturers, especially in the electronics industry, are coming to set up production bases in Vietnam in the wake of the investment wave of multinational corporations in the country.
It is reported that many Japanese parts manufacturers have invested in Vietnam to become supply chains for multinational corporations.
Murata Manufacturing Co has four factories producing electronics parts in Vietnam while Sharp and Sumitomo Electric also manufacture camera modules and connectors in the country, respectively.
The same move is also seen with South Korean parts manufacturers, especially when big names from the country, including Samsung, have invested significantly in Vietnam. Samsung has announced requirements of around 500 vendors for its factories in Vietnam next year.
In the aviation sector, recent investments by leading global manufacturer of aircraft components American Universal Alloy Corporation (UAC) in the central city of Danang is also helping Vietnam lure many foreign parts manufacturers.
According to UAC’s Chief Operating Officer Kevin Loebbaka, the corporation will develop a chain of parts supply manufacturers, which will employ some 2,000 workers, to meet its production plans.
The trend is forecast to continue as foreign giants are making commitments to bring more investors to Vietnam. As in the case of Samsung, during a recent meeting with Prime Minister Nguyen Xuan Phuc, General Director of Samsung Vietnam Choi Joo Ho said, while expanding operations in Vietnam, the group will make an effort to call for investment from other South Korean enterprises to this country.
Global manufacturing powerhouse
According to experts, the influx of multinational corporations into Vietnam will help the country become more attractive to many other foreign components suppliers and solidify its position as a global manufacturing hub.
Deputy managing director of Thai Reed Tradex Co Suttisak Wilanan said foreign electronics parts manufacturers will head to Vietnam as giant firms flock to the country, adding this is good for Vietnam and the supporting industries themselves as the country has a growing electronics manufacturing industry and one of the lowest labor costs.
Vietnam is a destination for low-cost manufacturing, but it will also climb the learning curve. Vietnam will be able to do more value-added activities such as developing its own tooling. In five to 10 years, the country will develop the capability to become a turnkey manufacturing center.
Besides, the on-going US-China trade war has added new energy to the debate over whether importers should shift production to Vietnam.
According to Virginia B. Foote, co-chair of the Vietnam Business Forum, Vietnam has outperformed many of its peers in attracting FDI, with examples in manufacturing and infrastructure, services, consumer goods, and agricultural and industrial products.
There are tremendous opportunities in Vietnam for both domestic and foreign business sectors, said Foote, adding the US-China trade tensions have highlighted the risk of concentrating production bases in a single country and are triggering supply chain reorganization. Companies are considering shifting some production flows, and Southeast Asia will compete to gain some of that business.
Reports from the Ministry of Planning and Investment’s Foreign Investment Agency also showed that the manufacturing sector retains the most attention among foreign investors in Vietnam. The total newly-registered FDI capital in this sector reached US$9.06 billion last year, making up 50.5 percent of the country’s total newly-pledged FDI.
The trend continued in the first five months of this year, with FDI hitting a four year high of US$16.74 billion, a year-on-year increase of 69.1 percent. Out of 19 sectors receiving capital, manufacturing and processing came on top with US$10.5 billion, accounting for 72 percent of total FDI.