Which direction should Vietnam take to develop support industry ecosystem?

Vietnam has been one of the fastest-growing economies in Southeast Asia for the past few decades, and its success is largely attributed to its export-led growth model.

However, the country still faces many challenges in developing its support industry ecosystem, particularly in the electronics sector, which is the world’s largest export as measured by international sales. To address this issue, Vietnam can learn from the experience of East Asian economies, especially those that have excelled in the electronics industry, such as Taiwan, South Korea, and Singapore.

According to recent data from the United Nations, exports of electronic circuit components from all countries totaled $1.015 trillion in 2021, representing 4.7% of the overall value of exported products. The five largest exporters of electronic circuit components by value are Hong Kong, Taiwan, mainland China, Singapore, and South Korea, which together generated 71.8% of the world’s overall shipments of electronic circuit components in 2021. Among continents, suppliers in Asia sold the highest dollar worth of exported electronic circuit components on global markets during 2021, accounting for 88% of the world’s total.

The electronics industry is crucial to the economies of East Asian countries, as it has driven their export-led growth model for decades. In Taiwan, for instance, the electronics industry accounts for nearly 40% of the country’s total exports. Similarly, in South Korea, the electronics industry is the backbone of the country’s export-oriented economy, and it accounts for more than 35% of the country’s total exports. Singapore has also been successful in developing its electronics industry, with the sector contributing around 25% of the country’s total manufacturing output.

Vietnam can learn several lessons from East Asian economies in developing its support industry ecosystem in the electronics sector. One of the most critical factors is the government’s role in supporting the development of the industry. The government must create a conducive environment for the industry’s growth by providing supportive policies, including tax incentives, subsidies, and other benefits. In Taiwan, for instance, the government has played a crucial role in supporting the electronics industry’s development by investing in research and development, promoting innovation, and providing financial support to local companies.

Another lesson is the importance of building a skilled workforce to support the industry’s growth. The electronics industry is a highly skilled and technology-driven industry, and companies need a skilled workforce to succeed. East Asian countries have invested heavily in education and training programs to develop the necessary skills for their workforce. Taiwan government has implemented a series of initiatives to develop the country’s human capital, including establishing vocational schools, universities, and research institutions to provide training and education for the industry.

East Asian economies have also emphasized the importance of creating an ecosystem that fosters innovation and collaboration between companies. Taiwan has established the Hsinchu Science Park, which is home to many high-tech companies, research institutions, and academic institutions. This ecosystem has created a platform for collaboration and innovation, enabling companies to develop new technologies and products. Similarly, in South Korea, the government has established several innovation clusters, such as the Gyeonggi Bio Center and the Daedeok Innopolis, to promote collaboration and innovation.

Vietnam faces several challenges in developing its support industry ecosystem. One of the most significant challenges is the lack of a skilled workforce. Although the country has made progress in improving its education system, it still lags behind its East Asian counterparts. The quality of education and training programs needs to be improved to produce a skilled workforce that can support the electronics industry’s growth.

Another challenge is the lack of infrastructure and a supportive ecosystem, according to a recent report from the Ministry of Industry and Trade. The report noted that the industry’s development has remained slow, and foreign firms have been unable to find suitable suppliers within the country. Instead, they have had to turn to overseas markets, such as China and Thailand, to source the parts they need.

The Ministry has set a target for the support industry to account for 11% of Vietnam’s industrial production value by 2025, but this will be challenging to achieve without significant improvements.

CNCTech’s projects in Vinh Phuc Province.

According to data from the Ministry of Industrial and Trade, Vinh Phuc has been the leading province in Vietnam for electronic components manufacturing, with a total revenue more than 8 billion USD in 2022, marking a growth of 15% from 2021.

CNCTech, the Vietnamese industrial group has recently acquired 200 hecta industrial land in the midland province, aims to making Vinh Phuc the largest component manufacturing center in Southeast Asia.

To achieve this goal, CNCTech has set some ambitious goals for 2030. The company aims to become an industry ambassador, providing industrial and integrated manufacturing services to 200 partners and attracting 3 billion USD in investment capital, creating jobs for more than 50,000 employees. To do so, CNCTech plans to invest in cooperation and association with other businesses, focusing on the policy of special attraction to Taiwanese, Korean, Japanese and American enterprises in component production.

In addition, CNCTech will also develop 500 hectares of factories and integrated logistics, as well as 50 hectares of housing, office, school, and service ecosystems for high-tech human resources. The company will provide training for 1,000 middle managers and technicians with foreign partners, which will not only create a high-tech workforce but also attract more investment to the region.

CNCTech’s initiative is expected to help solve some of the challenges that the component manufacturing industry is facing in Vietnam, including the lack of skilled labor, infrastructure, and investment. With this initiative, Vinh Phuc will be able to compete with other manufacturing centers in the region, such as Thailand and Malaysia, and become the largest component manufacturing center in Southeast Asia.