A Samsung's factory in the northern province of Bac Ninh
Vietnam’s underdeveloped supporting industry is unable to meet the requirements of foreign behemoths or benefit from them.
Since setting up its first phone factory in the country in 2009, South Korea’s Samsung has been annually exporting billions of dollars worth cell phones and parts.
Last year the number exceeded $20 billion, or an amazing 15 percent of Vietnam’s total exports and more than the total shipments by a local textile and garment industry comprising nearly 4,000 businesses.
Samsung’s second plant to assemble other devices including tablets is set to go on stream in the next quarter. It is expected to double the firm’s annual revenues.
Foreign firms like Samsung often want to maximize use of local components and services because of concerns about time and costs, but in Vietnam they can find few local businesses to buy from.
Of 52 firms which supply Samsung, only four are fully domestic and they provide only basic services like packaging and printing.
Nguyen Van Dao, deputy director of Samsung Vina – a joint venture between Samsung and the Ho Chi Minh City-based TIE company -- said almost no supporting firm can meet Samsung's standards, especially in the phone industry.
He doubted that the firm would be able to achieve its target of increasing the ratio of local supporting firms to half by 2015.
But those which manage to become suppliers are guaranteed not only revenues but also other benefits.
Le Duc Hoai, director of manufacturing services provider Huynh Duc, which supplies to many Japanese firms like electric-motor manufacturers Nidec Corp and Mabuchi Motor, said his firm has not only improved its brand image but also has access to a high-profile manufacturing environment.
But Truong Van Tien, director of machinery firm Duy Khanh, said very few local businesses have been able to seize the chance and remain suppliers of unsophisticated parts.
Her firm is an equipment supplier to Japanese electronics firm Toshiba, but of a small number of items.
US chip maker Intel, South Korean electronics firm LG, and Finnish phone producer Nokia all have a presence in Vietnam.
An Intel spokesperson said Vietnamese supporting businesses have been unable to win component supply contracts since the chip maker's sourcing process comprises nine stages involving assessment of many aspects from suppliers' financial capability to consistency of parts' quality.
An unnamed machinery expert said, however, that foreign firms’ requirements are not very stringent except for high-tech products.
The Vietnamese supporting industry still has many weaknesses, the expert said, urging it to address them to catch up in the market.
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