HCM City keen to develop supporting industries
Global cordless power equipment and floor care company Techtronic Industries Co. Ltd. (TTI) earlier this month organised its first-ever Vietnam supplier workshop together with the Saigon High-Tech Park to look for local suppliers for its manufacturing facilities in Viet Nam.
TTI has a number of small factories in Binh Duong Province and will begin construction of its largest in Viet Nam along with an R&D centre at the SHTP before December this year.
Nate Easter, executive vice president of global sourcing and outdoor products operation for the company, said: “Armed with the tremendous support from SHTP and the local government, we are glad to have chosen SHTP as the location of our new plant in Viet Nam. It has favourable access to a vast pool of talent, high-quality suppliers and a strong commitment from the government and public administration, fully supporting TTI’s current and future development plans at the SHTP.
“Right now our local content is around 38 per cent. Our goal is to achieve over 60 per cent by the end of this year and 85 per cent by 2024.”
Phan Thuc Dinh, the company’s supply chain OPEX associate manager, said “Vietnamese suppliers basically satisfy TTI’s requirements but have weaknesses in terms of system management.
“TTI has a team that supports domestic suppliers to enable them to fulfill all requirements to join TTI’s supply chain.”
In the past year the company has developed nearly 100 suppliers in Viet Nam, and it wants to find more local suppliers to serve its future business growth, he said.
Nguyen Anh Thi, head of SHTP’s management board, said: “Faced with an interruption in feedstock imports due to the Covid-19 pandemic, many foreign companies are increasingly seeking local sources.
“This will be an unprecedented opportunity for local firms in the supporting industries to enter the supply chains of foreign firms.”
According to its Department of Industry and Trade, HCM City has in recent years adopted many mechanisms and policies to back supporting industries, including programmes to connect local suppliers with foreign manufacturers.
Le Nguyen Duy Oanh, deputy director of the department’s Centre for Supporting Industries Development (CSID), said it is not too difficult for local firms to meet quality standards to enter global supply chains, and the only question is if their managements really want to transform.
“Many foreign corporations are committed to sending experts to enable Vietnamese enterprises to improve their production capacity. Since 2018 the CSID has co-operated with foreign companies to help local firms to improve production capacity, reduce the rate of defective goods and mitigate weaknesses in their management.
“As a result, more than 30 city companies have joined the supply chain of Samsung, Schneider, Sony, Honda, Sanyo, and other companies.”
In addition to support from authorities, local suppliers are also constantly striving to improve their capacity to enable them to integration deeper with the global value chain.
A Tuong Vinh Company executive said his firm has a 40,000sq.m factory with 1,000 engineers and workers for manufacturing supporting industrial products.
Its main product is the motor, the heart of all machines, and it is now participating in the supply chains of many companies from Japan, South Korea and Europe, he said.
It is preparing to build a second factory on the same scale, he said, adding that by joining in TTI’s supplier workshop, the company sought to supply motor products for TTI’s equipment and machinery.
The number of city firms that supply foreign companies’ global supply chain has increased significantly.
For instance, Lap Phuc Precision Mold Company is supplying precision mould products to Colgate, Hiep Phuoc Thanh and Minh Nguyen have become vendors for Samsung, and Thong Nhat and Amura Precision make plastic components for tier 1 and 2 suppliers of automobile companies, among others, the Department of Industry and Trade said.
According to foreign companies, Vietnamese firms have made great progress in the manufacture of industrial supporting products, it added.
Many Vietnamese companies confidently introduce their products to foreign firms, and not just simple products like screws, moulds and plastic packaging, but also high value-added products such as motor cores, electronic chips and circuit boards.
To promote the development of supporting industries, the Department of Industry and Trade is drafting an investment stimulus programme for 2021 – 25 for supporting industry enterprises to improve production technologies and equipment and make more products meeting global corporations’ requirements and entrench themselves in global supply chains.
Supporting industries are key to raising the value of the industrial production, and promoting them is vital to attracting more giant foreign investors to the city, Thi added.