Vietnam Fires Digital Salvo To Become Manufacturing Center
- By Lachlan Colquhoun
- May 30, 2022
There was a time when manufacturing operations moved to new locations because setup costs and labor were cheaper.
This is what underpinned China’s significant advance earlier this century. More recently, it has worked for Vietnam, which has also benefitted from the US-China freeze as it ramps up its manufacturing sector.
However, there appears to be a new differentiator: the implementation of smart factory technologies and processes. And once again, Vietnam is leading the charge.
Laying the smart foundation
The Southeast Asian nation already has international airports, seaports, internal rail infrastructure, and an industrious and educated population. In 2020, the manufacturing and processing sector took 58% of all foreign direct investment in the country and is now critical to economic growth and the goal of sustainable 7% productivity growth each year through to 2025.
Vietnam also understands the importance of connectivity and digital infrastructure. 2022 has been nominated as a critical year for the rollout of 5G services for the country, with European supplier Ericsson an active player in the rollout.
Ericsson estimates that over two-thirds of global manufacturers will relocate to the Asia-Pacific by 2025, with Vietnam one of the most attractive destinations. The company forecasts 5G revenues across the nation of USD1.54 billion by 2030, with the manufacturing sector a leader.
“This is the only way for us to conserve our resources while growing our business efficiently”
Perhaps it is the legacy of the planned economy approach, but the implementation of smart factories also has strong government support as a nation-building strategy. The Government has implemented a Supporting Enterprises’ Digital Transformation Strategy, which has already driven transformation for more than ten local businesses.
Beyond this, smart factories were also the focus of the third Industry 4.0 forum held in Vietnam late last year.
The theme was “developing smart production in industrialization and modernization, with a vision to 2045.”
Samsung is a key investor
This is already delivering results, and earlier this year, the Government signed a deal with South Korean electronics giant Samsung to create an innovative factory project in Vinh Phuc province to support 14 domestic suppliers. Samsung is invested an additional USD920 million into Vietnam, adding to its eight facilities in the country, including six manufacturing plants, one R&D center, and one sales facility.
Ultimately, the project aims to train as many as 100 Vietnamese experts and be the catalyst to help 50 Vietnamese businesses set up smart factories in 2022 and 2023.
The project is “expected to help businesses enhance their competitiveness by improving their productivity and product quality, and reducing production costs,” a Government statement said before emphasizing the country’s prioritization of positioning Vietnam for the “fourth industrial revolution.”
“The project is also supposed to strengthen the connection between enterprises and local authorities, as well as between foreign-invested enterprises and domestic ones.”
The project is in response to the first annual report by the Vietnam Association of Foreign-Invested Enterprises, which pinpointed problems in the domestic Vietnamese supply chain, where the capacity has not yet lived up to expectations nor attracted a critical mass of advanced technologies.
Another South Korean corporate moving into smart factory projects in Vietnam is building product conglomerate Dongwha Enterprise, which has already introduced its smart factory platform at its plant in Ho Chi Minh City, with plans for a Hanoi rollout later this year.
“We will continue to develop the smart factory platform to lead production innovation and strive to establish Dongwha as a digital transformation leader in the industry,” said Choi Byung-Yeop, executive vice president of Dongwha’s digital innovation office. That development also favors Vietnam.
SMEs are the key
While these large global corporates can help drive Vietnam’s smart factory push, on the ground, it will be Vietnamese small and medium-sized enterprises (SMEs) that will need to skill up and embrace the new technologies for the vision to become a reality.
SMEs are a crucial focus of Vietnam’s National Strategy on the Fourth Industrial Revolution, set out in the ambitious Resolution Number 52. It states that by 2025, “Broadband Internet shall cover 100% of the communes and by 2030, 5G mobile network shall cover the whole country; all citizens shall have access to broadband Internet with low cost.”
“In order to make Vietnam become one of the smart production and service centers as well as one of the leading start-up and innovation centers in Asia, the Central Committee sets some guidelines,” the resolution says, before going on to identify education and training and “key research programs on priority technologies, with a focus on information and communication technology, mechatronics, new technologies in the field of energy, artificial intelligence, biotechnology, and biomedical electronics.”
Local furniture manufacturer Xuan Hoa JSC was recently featured in a government publication, with the company pushing ahead with a digital transformation.
“We will gradually digitalize our process towards building a smart factory with a wide range of products,” said a company spokesman.
“This is the only way for us to conserve our resources while growing our business efficiently.”
So while Vietnam may have been best know in the 20th century for its nationalist revolution against French colonial rule, in the 21st century, it is committing to a very different — and more peaceful — revolution but one which also has high ambitions to build wealth and security of its population.
Lachlan Colquhoun is the Australia and New Zealand correspondent for CDOTrends and the NextGenConnectivity editor. He remains fascinated with how businesses reinvent themselves through digital technology to solve existing issues and change their entire business models. You can reach him at [email protected].
Image credit: iStockphoto/JIRAROJ PRADITCHAROENKUL