Domestic electronic industry yet to reach potential

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95 percent of electronics export turnover is from foreign invested enterprises (FIEs).

In 2013, the electronic industry for the first time outstripped textiles and garments to become the industry with the biggest export turnover, reaching $32.2 billion. In 2014, electronics export turnover hit the $35 billion threshold.

In 2015, phone and phone components alone brought $30 billion in export turnover. Meanwhile, computer, electronics and electronic components brought $15.6 billion.

However, 95 percent of electronics export turnover is from foreign invested enterprises (FIEs).

A recent report of the International Labor Organization (ILO) showed that 99 out of 100 large electronic companies in Vietnam were FIEs, while the only Vietnamese enterprise in the top 100 was a state-owned company which ranked 100th.

While every Vietnamese enterprise has 24 workers on average, every FIE has 630, which accounts for 4 percent of total jobs in the industry.

According to the Vietnam Chamber of Commerce and Industry (VCCI), though the electronic industry is a symbol of integration, Vietnamese enterprises are outside of the supply chain as they can only provide carton boxes and simple products.

Samsung and LG from South Korea are well known as the biggest investors in the electronic industry in Vietnam. LG Innotek Co Ltd in late September received an investment license for its project capitalized at $550 million in Hai Phong City, its third project in the city.

The first is a household-use electronics complex with investment capital of $1.5 billion, established in 2015. The second is the OLED screen production complex capitalized at $1.5 billion.

Meanwhile, by the end of 2015, the total investment capital Samsung had committed to pour into its project in Vietnam had reached $14.8 billion.

According to the Foreign Investment Agency (FIA), the electronic production, with low margin costs, tends to be organized in countries which have an advantage in low labor costs. This is one of the reasons why Vietnam is becoming a world’s production base, as noted by Bloomberg.

Vietnamese enterprises at disadvantage

Commenting about Vietnamese enterprises’ capability, Nguyen Thanh Thu from the HCM City Economic University said enterprises were unable to make products and could not join big manufacturers’ global supply chains.

According to Samsung Vietnam, of 190 satellite enterprises that provide electronic parts to the manufacturer, Vietnamese enterprises account for less than 10 percent.

Canon Vietnam also said 100-percent owned Vietnamese enterprises only account for a very small proportion of its 120 component suppliers.

Orion Hanel, which was once a star of the electronic industry, filed for bankruptcy in 2008.

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