How do you assess the potential of the supporting industry in Vietnam?

Jun-Ho Lee, deputy director of the Vietnam-Korea Technology Consulting and Solution Centre (VITASK)

Vietnam’s supporting industry sector has a large room for growth because the Vietnamese electronics industry has a fairly large position as one of the top 15 largest electronics exporting countries in the world. Besides that, this sector leads in the total import and export turnover of all industries in Vietnam.

A report from the Department of Industry under the Ministry of Industry and Trade (MoIT) shows that in 2022, the electronics industry had an export turnover of $114.4 billion, an increase of about 6 per cent on-year, and accounting for over 30 per cent of the total export turnover of the whole country.

Among the six groups of goods with export turnover of over $10 billion in Vietnam, there are also computers, mobile phones, electronics, and components. The export market of Vietnam’s electronic products is also continuously expanding, including the key markets of China, the US, the EU, Japan, and South Korea.

The appearance of global technology corporations also creates a big boost for supporting enterprises in terms of the electronics industry, which is a great opportunity for domestic supporting enterprises to participate in the supply chain of parts and accessories for global corporations.

How do Vietnamese supporting enterprises receive support from VITASK?

The Vietnamese government is making efforts to enhance the development of the supporting industry and the latest move is the issuance of Resolution No.115/NQ-CP on measures to boost the development of the supporting industry through to 2030, with electronics, car assembly, and manufacturing some of the priority sectors.

The industry is expected to develop through the mobilisation of resources from all economic sectors, especially foreign-invested enterprises and domestic counterparts.

Besides that, the governments of South Korea and Vietnam plan to continue working together to support investment and trade activities for enterprises on both sides. In December 2020, the two governments signed a business agreement with representatives of the South Korean Ministry of Trade, Industry, and Energy; the MoIT; LG Electronics; Hyundai Motors; and POSCO in attendance.

The agreement provides technical consulting for Vietnamese material, component, and equipment suppliers and builds closer ties in terms of mutual supply and demand.

Based on this, VITASK was established in 2020 to help domestic enterprises improve their competition capacity to participate in the global value chains. Its purpose is to further promote bilateral cooperation in industrial materials, equipment, and components and for South Korean companies to join Vietnam’s projects.

The centre is implementing a technical assistance initiative with South Korean consultants to help Vietnamese businesses solve technical problems at the production site, offer engineer training courses for students, support product performance assessment and error analysis, and promote technical exchanges between Vietnamese and South Korean businesses.

Notably, VITASK has supported over 100 businesses, including in intensive and regular instruction. As a result, many businesses have significantly reduced error rates.

The centre also trains engineers and professional technical consultants while running material and component performance assessment programmes for Vietnamese companies. Since 2020, an average of 25 students have participated in training each year.

Besides that, we are also a bridge to connect supply with demand from the South Korean side. In the context that small- and medium-sized enterprises have limits when it comes to contacting consultants, especially qualified experts, our initiative contributes to not only meeting the training demand, but also creating effectiveness.

In addition to direct technical support programmes at factories, what programmes has VITASK implemented to strengthen the connection between businesses of the two countries?

We continuously promote connections and exchanges between Vietnamese and South Korean businesses. In recent times this has included supporting businesses to attend VIMEXPO in 2021, organising an investment promotion conference in the northern province of Vinh Phuc, and organising the Vietnam-Korea Business Exchange Conference in 2022. Through these programmes, many MoUs between businesses were signed.

In addition to in-depth instruction at the factories, VITASK also organised seminars to share knowledge and experience for businesses, such as a workshop on technical guidance and seminars relating to digitalisation in production, smart factories, and batteries for electric cars, among others.

How do projects like these contribute to promoting foreign-invested capital inflows from South Korea?

The field of processing and manufacturing is always one that attracts the largest amount of overseas capital, so the demand for supporting industrial products is considerable.

Foreign-invested groups may have a group of satellites in Vietnam, and they really have a demand for increasing the localisation ratio with the main purpose of avoiding dependence on vendors and to ensure on competitive selling prices between them. They encourage Vietnam to foster the development of the supporting industry and open more factories.

To be competitive, goods must meet the criteria of price and quality. Therefore, the intensive technical support provided by VITASK’s experts contributes to helping domestic enterprises improve their competitiveness by providing sophisticated products at competitive prices, and thereby attracting more investors.

Regarding South Korea in particular, it is currently the largest foreign investment partner in Vietnam both in terms of registered capital and the number of projects. Vietnam’s supporting industry has many development opportunities with a number of large foreign corporations such as Samsung, Hyundai, and LG expanding their operations.

What are VITASK’s activities in the near future?

In 2023, our centre will continue to carry out technical support activities, human resource training programmes, and trade connections for businesses.

We will also build testing facilities to support product feature assessment and fault analysis. The trial production SMT line for research and testing has already been delivered to Vietnam and is expected to be completed and put into use soon.