Global value chains a mixed bag for IT firms
Global value chains a mixed bag for IT firms
Growth opportunities abound in the internet of things segment but problems like outdated technologies, poor management skills and low technical capacity are preventing Vietnamese firms from entering global value chains, a workshop heard in HCM City on Thursday.
To Thi Thu Huong, deputy director of the Ministry of Information and Communications’ Information and Technology Department, said IT is a fast-growing sector with large exports which makes a significant contribution to the country’s GDP.
At the end of last year, the country had more than 28,420 enterprises in the hardware, software, digital content, and IT services segments, 16 per cent more than a year earlier, and their revenues were up more than 35 per cent to US$91.6 billion, she said.
She said the Government’s priority is to help enterprises enhance their capacity and competitiveness to integrate into global value chains by offering incentives such as land use fee and tax concessions and other measures.
But many Vietnamese companies still face limitations such as lack of experience and knowledge in producing high-quality IT products and selling them in the global market and lack of skilled workers, she said.
“That is why foreign enterprises have to bring their supporting industries with them when they come to Viet Nam.”
Nguyen Anh Tuan, her colleague at the department, said the Fourth Industrial Revolution would stimulate the adoption of new technologies, especially internet of things (IOT) equipment, which would bring opportunities to Vietnamese companies.
“Local enterprises who understand the local market will have the upper hand over foreign enterprises.
“Another advantage is the new flow of investment as the US–China trade war shifts some of the investment from China to Viet Nam.”
But IT enterprises face challenges like competition from other regional rivals, especially those in India and Myanmar, who can also offer low-cost labour, and quality products, he said.
Given the current opportunities and challenges, Tuan suggested ways for Vietnamese IT enterprises to develop. Firstly, telecom companies and start-ups should focus on producing IoT products and telecommunications network equipment.
For traditional electronics companies, the way forward is to offer outsourcing services and produce electronic appliances.
He said Vietnamese firms can further integrate into global value chains by becoming manufacturers and suppliers for giant companies.
A number of Vietnamese companies have become first- and second-tier suppliers of large foreign companies in the country like Samsung, LG and Intel.
The number of Samsung’s tier-1 Vietnamese vendors has increased dramatically, from four in 2014 to 29 now. It organised a consultation programme for 130 local companies with the aim that around 50 would become tier-1 vendors by 2020.
Nguyen Anh Tuan of Samsung Viet Nam said his company is willing to partner with local firms if they can produce quality products at lower prices than those offered by suppliers from outside the country.
“What is important is the determination and commitments of local firms in terms of how long and how sustainable their investment is.”
Though Vietnamese enterprises lack the technical skills to produce sophisticated parts for Samsung smartphones, they show much potential in the home electronics segment, he said.
Samsung is building an electronics and home appliances production hub in HCM City, its first smart manufacturing factory of this kind in the world and the biggest in Southeast Asia, he added.
The workshop on “Vietnamese IT products and services in global value chains: opportunities and challenges”, is an annual event organised by Ministry of Information and Communications.
