Vietnam’s Local Supplier Revolution: Components Become More Localised
Vietnam has been experiencing a significant shift in its approach to local component production, a change driven by both government policies and market dynamics. The country is increasingly focusing on developing its local manufacturing capabilities, moving away from being merely an assembly hub for foreign companies. This transition is marked by a growing emphasis on producing higher-value components locally, especially in key sectors like electronics, automotive, and machinery. The Vietnamese government has been instrumental in this shift, implementing policies that encourage foreign investment in local production and technology transfer. As a result, Vietnam is evolving into a more integral player in the global supply chain, capable of producing sophisticated components and reducing its dependence on imports.
During a working session in Ninh Binh province in November 2022, Prime Minister Pham Minh Chinh said he had instructed ministries and competent agencies to design a comprehensive package of support solutions for businesses
Credit: Vietnam Business Forum
Shift Towards Local Supplier Engagement
With investments from major global firms like Apple, Intel, Samsung, and LG, there’s a clear trend towards diversifying production and reducing over-reliance on single-source markets, such as China. This diversification has led to an increased demand for local suppliers capable of meeting the high standards required by these multinational corporations. Local suppliers in Vietnam play a crucial role in the supply chain of both domestic and international markets. They are key to providing raw materials, components, and finished products. Their agility and ability to adapt to market demands have made Vietnam an attractive destination for foreign investment.
Local Component Examples
In Vietnam, an array of suppliers is fueling the growth of its manufacturing sector, particularly in the production of components for various industries. Vietnam Precision Industrial No.1 (VPIC1) stands out for its expertise in mechanical products and tools, especially for the automotive and motorcycle industries, producing essential parts like engine components and chassis. Foster Electric (Vietnam) Co., Ltd. specializes in audio components, producing speakers for a range of applications. Yazaki Corporation Vietnam, a Japanese firm, is known for its automotive components like wiring harnesses and electronic equipment. Nidec Corporation Vietnam focuses on small precision motors for electronic devices and automotive parts, while Toyoda Gosei Co., Ltd. Vietnam specializes in automotive parts, including rubber and plastic components like airbags and steering wheels. PHA Peong Hwa Automotive is recognized for producing car door systems, an essential component for vehicle manufacturers. You-Tech has carved a niche in electromechanics and precision-machined parts, catering to the needs of various industrial applications. INZI Controls is another key player, specializing in the manufacture of coolant control valves and electric thermostats, crucial for vehicle temperature regulation. Additionally, Shin-Etsu makes a significant contribution by producing rare-earth magnets. These magnets are not only vital for hybrid cars but also play a crucial role in the functionality of energy-saving air conditioners, demonstrating the company’s commitment to supporting eco-friendly technologies. Action Composites in Vietnam benefits from the latest advancements in composite material manufacturing. The company employs cutting-edge techniques like automated fiber placement and resin transfer molding, ensuring high precision and quality in its products. This technological edge is vital in industries like automotive and aerospace, where the demand for lightweight yet strong materials is constantly growing.
For foreign businesses, Vietnam’s evolving supply chain, characterized by a growing emphasis on local suppliers, presents several significant opportunities. The shift towards diversification in production, reduces the over-reliance on single-source markets like China. This change has increased the demand for Vietnamese local suppliers who can meet the high standards of multinational corporations. They are producing essential components across various industries, including automotive and electronics, which are crucial for global supply chains. This means access to a robust and versatile manufacturing base in Vietnam, not only enhancing the supply chain resilience but also provides businesses with competitive options for sourcing.
Outlook is Promising with Incoming Manufacturing Expansions
The outlook for local suppliers in Vietnam is increasingly promising, signaling an ongoing trend where more companies are looking to start manufacturing components in the country in the coming years. Driven by Vietnam’s strategic location, favorable economic policies, and competitive labor costs, the nation is fast becoming a hub for both export-oriented and domestic manufacturing. This can be seen by LG expanding its manufacturing in Vietnam, Hai Phong, doubling LG Innotek’s camera module production capacity by 2025. A subsidiary of the German adhesive tape manufacturer Tesa SE, Tesa Tape has been expanding in Vietnam, supplying various adhesive solutions for automotive, electronics, and consumer goods. Wistron Corporation, a major Taiwanese original design manufacturer, one of Apple’s main manufacturing partners, will also be focusing on manufacturing the main graphics processing unit (GPU) server module, ICT (information and communication technology) products, including servers, computers, and mobile devices in Vietnam.
