Photo for illustration (Source: vov.vn)
Speaking at a recent business forum in Hanoi he told the audience that the country’s national strategy over the long-term should be to bolster it competitive advantage by creating a highly localized electronics manufacturing segment.
Prosperity does not grow out of a cheap labour pool, said Mr Long, nor low interest rates, the value of the Vietnamese dong or the inherent beauty of the country’s landscapes as many economists around the country have suggested.
Rather, it results from the country’s ability to innovate and fabricate new and novel electronic products for consumers around the globe.
Mr. Long noted that roughly 30% of the country’s total exports for 2015 were generated by the electronics industry, which is dominated by foreign sector giants Samsung, Intel and LG.
However, the localization rate for Samsung is currently only 12%, according to official statistics from the Ministry of Industry and Trade, which means that foreign companies working for Samsung are outperforming the domestic sector by more than seven-fold.
The large electronics exports of companies like Samsung to the rest of the globe may be impressive. However, the country needs to pause and take into consideration the paucity of the domestic sector contribution.
Yasuzumi Hirotaka, a representative of Japan’s trade promotion agency Jetro agreed with Mr. Long, noting that Japanese manufacturers operating in Vietnam have only a 14% localization rate.
This obviously means that the domestic sector is losing 86% of the market for intermediary goods and raw materials to the foreign competition, which is a highly lucrative long-term market that it should set its sights on.
Vu Tien Loc, President of the Vietnam Chamber of Commerce and Industry made the point that to achieve a higher localization rate local companies must acquire a competitive advantage through acts of innovation.
They must approach innovation in its broadest sense, he said, including achieving both new technologies and new ways of doing things.
Innovation can be manifested in a new product design, a new production process, a new marketing approach, or a new way of conducting training. Much innovation, said Mr. Loc, is mundane and incremental, depending more on accumulation of small insights and advances than on a single, major technological breakthrough.
It most often involves ideas that may have been around for a while, but never vigorously pursued. It always involves an investment in skills and the acquisition of knowledge, as well as in investment in physical assets and brand development.
With few exceptions, innovation is the result of unusual effort. Once a company achieves competitive advantage through an innovation, it can then sustain it only through relentless improvement.
In an era of increased global competition, stimulating the country’s electronics manufacturing will require a commitment to public-private partnerships that deliver on the key driver of industrial competitiveness - a highly trained workforce that can use technology to translate basic and applied research and development to large-scale commercial innovations./.