Supporting industries: Theory and reality in Vietnam

RSL Group – Supporting Industries is considered the foundation for the main industry through the supply of parts, components and engineering processes. processes. The article below will provide information about the supporting industry in general and some overviews of the supporting industry in Vietnam.

I. Concept and classification of supporting industries

Supporting industry is a concept that refers to all industrial products that play an auxiliary role in the production of main components. Specifically, components, accessories, spare parts, packaging products, raw materials for painting, dyeing, etc. or intermediate products, pre-processed ingredients.

The supporting industry sector can be divided into 3 large groups as follows:

• Supporting industries provide machinery, tools and equipment for many industries, including assembly, processing and other supporting industries.
• Supporting industries for the processing industry provide raw materials for the processing industry such as textiles, garments, footwear… These supporting industries previously did not require highly skilled human resources, but in the past Revolution 4.0, when production scale and machinery equipment changed, human resource requirements were higher.
• Supporting industries for the assembly industry provide components and spare parts for the assembly industry such as cars, motorbikes, electronics… These supporting industries require more highly skilled labor, the main products are metal components, and rubber plastics, requirements to meet common standards and have a great impact on product quality. Products

Thus, supporting industries are an important part of national industries in the era of global economic integration. In other words, the industry in each country cannot develop strongly without a flourishing supporting industry because it is the factor that determines production costs, increases added value and determines the ability competition of the final product.

II. Features of Vietnam’s supporting industries

Vietnam has many strong industries such as garments, footwear, automobile and motorbike assembly… However, the internal strength of the domestic industry is still weak, the competitiveness of industrial enterprises is not high, and the added value created domestically is still low. The industry mainly depends on external resources, such as foreign direct investment capital, spare parts and components, and imported raw materials… making the production process passive at high prices.

In general, our country’s supporting industry can be summarized based on the following basic characteristics:

• Regarding demand scale: the Vietnamese market for assemblers, especially automobile manufacturers, is still quite small compared to market capacity.
• Regarding technology: the quality gap between domestic suppliers and the requirements of FDI assemblers is still quite large. In particular, many raw materials for production still depend entirely on imports and cannot be produced domestically. The machinery of domestic suppliers is still outdated and does not meet the requirements of the technological standard for supporting industries.
• Regarding human resources: the depth of expertise of workers in complex products that require high skills is still limited. Industrial human resources are still weak, the rate of trained workers is low, and there is a lack of connection between the production sector and training facilities.
• Regarding information channels: the connection between domestic supplier companies and assemblers is still quite loose, lacking a database of domestic suppliers for assembly businesses to search.
• Regarding competitiveness: 70% of enterprises receiving incentives in production and business activities are foreign-invested enterprises, and the rest belong to domestic enterprises. In addition, the competitiveness of Vietnam’s supporting industries is still worse than that of other countries in the region because up to now, state-owned enterprises, the main entities in this field, often operate in the same style. full package (production from A to Z), so they have almost no concept of supporting industries.

III. Current situation of supporting industries in Vietnam

Vietnam has over 500 enterprises producing metal components to supply downstream industries, accounting for a very small proportion of the country’s more than 7,000 mechanical enterprises. The main markets of businesses in the industry are the fields of producing motorbikes, agricultural-industrial machinery, and automobiles.

Domestically produced metal components currently meet 85-90% of the demand for motorbike production; about 15-40% of the demand for components for automobile production (depending on vehicle type), about 20% for synchronous equipment production and 40-60% for the production of agricultural machines, engines and 40% % for construction machines. Supplying metal components to high-tech industries currently meets about 10% of demand.

• Car supporting industry

The industry of manufacturing mechanical components for automobiles, synchronous equipment and high-tech industries is still facing many difficulties. According to the Department of Industry, Ministry of Industry and Trade, Vietnam’s mechanical engineering currently has strengths concentrated in three main sub-sectors, including motorbikes and motorbike spare parts; household mechanics and tools; cars and auto parts. Statistics show that these three sub-sectors account for nearly 70% of the industrial production value of mechanical engineering nationwide.

• Motorcycle supporting industry

The metal components manufacturing industry for motorbikes is considered to be relatively developed with high supply capacity. Due to the large market capacity, FDI assembly enterprises in Vietnam have called on many FDI suppliers to invest and build cooperative relationships with domestic suppliers.

• Textile supporting industry

Currently, Vietnam has to spend an average of more than 2 billion USD to import raw materials – including cotton, textile fibers, fabrics of all kinds, raw materials for textiles, garments, leather, shoes… mainly imported raw materials of origin. from China. The development of supporting industries for the textile and garment industry is still facing difficulties because some localities are not interested in developing weaving and dyeing projects, due to concerns about causing environmental pollution. In addition, the investment and development for the production of raw materials and accessories is very large, requiring large technology and capital. Many businesses, especially small and medium-sized enterprises, are not determined or do not have enough resources.

• Footwear supporting industry

Raw materials account for 68 – 75% of the cost structure of footwear products, however, the localization rate of leather and footwear products of Vietnamese enterprises is currently only about 40 – 45%. Vietnam currently has about 130 businesses investing in the production of raw materials and accessories, but only about 20 domestic businesses are capable of supplying high-quality raw materials, which makes it difficult for leather and shoe manufacturers. Difficulty in proactively ordering and sourcing raw materials.

To promote the development of the field of mechanical component manufacturing, in the coming time the State needs to have strong policies to encourage the development of production of manufacturing materials and at the same time choose to focus on the development of downstream industries. resources come with incentives to develop supporting industries for those fields.

Above RSL Group has provided readers with useful information about the concept and classification of supporting industries, as well as an overview of this industry in our country. If you have any questions, please contact our hotline immediately for answers. See more articles here. 

Source: Redsunland.vn