Saigon Hi-tech Park (SHTP) in District 9

The relocation of multinational corporations has accelerated the shift of foreign investment capital to Vietnam’s supporting industries to accommodate the lack of local suppliers.

According to Ho Chi Minh City People’s Committee, more foreign businesses are developing projects at Saigon Hi-tech Park (SHTP) in District 9 to become suppliers for Samsung Electronics’ CE Complex (SEHC) in the city.

As of February, four local companies and nine foreign-invested enterprises have been providing materials, spare parts, and accessories to SEHC.

Among them, Vija Technology JSC specialises in manufacturing automation equipment, industrial robots, precision mechanical details, and molds. Meanwhile, Daeyoung Electronics Vina Company manufactures and trades in electronic components and LED displays for household goods like refrigerators, washing machines, and air-conditioners.

Another supplier, New-Hanam Co., Ltd., makes motor and plastic injection molding for washing machines, vacuum cleaners, air conditioners, and other home appliances. The company is supplying motor products to Samsung, and received an investment certificate in 2016 following the development of SEHC.

At the beginning of the year, Dong Nai People’s Committee granted investment certificates to two suppliers for Samsung. South Korea’s Hansol Electronics Vietnam Co., Ltd., is investing $100 million in the Hansol Electronics Ho Nai project in the locality. Covering an area of over five hectares, the project specialises in manufacturing, processing, and assembling liquid crystal displays as well as printed board assembly for electronic circuit boards.

Another South Korean investor, Platel Vina, also got the nod to develop a factory in Amata Industrial Park in the southern province of Dong Nai with the registered investment capital of $30 million. The factory will manufacture electronic equipment covers as well as electronic components from plastic materials with a capacity of 400 tonnes of products per year.

Platel Vina is a member of Intops Group, which has been a Samsung supplier for 30 years – and Intops has already developed two factories in Vietnam.

Since the beginning of 2021, many southern localities like Ho Chi Minh City, Dong Nai, and Binh Duong have witnessed a surge in foreign investment capital into local supporting industries.

Mai Ba Truoc, director of Binh Duong Department of Planning and Investment, said that the province has attracted $300 million in foreign capital in the first two months of this year. Among them, there are a large number of supporting industry projects.

New MOTION Industry Co., Ltd. from Singapore will inject $185 million to build a manufacturing factory for radio screen and display products. Meanwhile, GIGA Electronic Vietnam Co., Ltd. will manufacture and assemble electronic components, power adapters and converters for mobile phones, and power tools as well as other LED-based products.

The growing presence of foreign suppliers is in line with the wave of manufacturing relocation to Vietnam. However, this trend is in contrast to the fact that local supporting industries are not adequately developed to fulfil the requirements of foreign manufacturers.

According to data from the Ministry of Industry and Trade, the total number of enterprises currently involved in Vietnam’s supporting industries is more than 600.

However, the number of domestic players involved in the global supply chain of foreign investors is low due to the internal constraints of the local suppliers and also the limitation of understanding between the two sides.

This issue has been one of the main obstacles for foreign investors to scale up their presence in Vietnam. Surveys by the Japan External Trade Organization (JETRO) reveal that the low localisation rate has been one of the main concerns for Japanese investors to expand presence in Vietnam.

Hirai Shinji, chief representative of JETRO in Ho Chi Minh City, cited a recent survey showing that the localisation rate has increased slowly since 2010. However, Japanese companies are considering re-establishing some supply chains affected by the COVID-19 outbreak by changing purchasing units. Thus, just under one-fifth of surveyed respondents will choose Vietnamese suppliers in the coming time, which is the highest rate across 20 countries in Asia.

In addition, the Japanese government has provided subsidies for 30 companies to increase production in Vietnam, in the first two rounds of a multi-billion dollar programme to diversify supply chains. A large number of Japanese manufacturers are supplying spare parts and materials such as Mabuchi Motor, Yokoi Mould, Pronics, and Meiko Electronics.

The new investment projects are expected to give a new boost to Vietnam’s supporting industries. In June last year, Vingroup unveiled its plan to inject VND3.4 trillion ($147.3 million) to build a manufacturing complex for automobile spare parts, which will support the “Make in Vietnam” automobiles plan from VinFast.

Meanwhile, global cordless power equipment and floor care company Techtronic Industries Co., Ltd. (TTI) aims to scout around 180-200 local suppliers to increase the localisation rate up to 80 per cent at its Vietnamese manufacturing facilities next year.

TTI has received an investment certificate for the establishment of a cordless power equipment plant at SHTP with the registered investment capital of $180 million which it expects to raise to $650 million within the next five years.

Meanwhile, the company is developing a high-rise factory in an industrial park in Ho Chi Minh City, which would facilitate more Vietnamese companies to join its global supply chains. It is hoped the new project will be greenlit in the near future.

Source: VIR