Electronics sector attractive to foreign backers

Vietnam's electronic industry has attracted USD 10 billion in foreign direct investment (FDI) capital from big names like Samsung, Foxconn, LG, Panasonic and Intel, according to the Foreign Investment Agency (FIA) under the Ministry of Planning and Investment (MPI).

With the largest turnover and market share growth of electronic exports in ASEAN, Vietnam has grown to become the 12^th largest electronics exporter in the world and the third largest in ASEAN.

Photo for illustration: baothuathienhue.vn

Vietnam's electronics output ranked behind Thailand, Singapore and Malaysia in 2013.

Production bases have been shifting to Vietnam in recent years to take advantage of preferential tax deals under free trade agreements such as the TPP and AEC.

Accordingly, the rules of origin force investors, who want to take advantage to further access ASEAN or TPP member markets, to invest in Vietnam more intensively and transfer technology to achieve a higher localization rate.

Attractive areas in Vietnam's electronics industry are large-scale mobile phone factories. Samsung alone has invested in a USD 2.5 billion factory in the northern province of Bac Ninh and a USD 2 billion facility in Thai Nguyen.

The group has also invested USD 1 billion on a manufacturing factory in HCM City.

The plant in Thai Nguyen has attracted satellite investors, and electronics component producers have invested hundreds of millions of dollars in Thai Nguyen province and Hai Phong city.

However, domestic electronics enterprises do not contribute much to the electronics supply chain.

Samsung Vietnam recently said that of the 80 satellite enterprises producing components and accessories, only 10 percent were Vietnamese.

These companies mainly provide printing and packaging, which have the lowest added value. Another problem is competing with other countries in the region, and investors may move to other countries when the investment incentive period ends.

To attract more FDI to the industry, the FIA recommends enterprises build science and technology policies to encourage technology transfer, training, research and development; sign technological cooperation contracts with large countries, connect research institutions and businesses and select products and sectors for research priority.

Intellectual property laws should also be tightened so that domestic and foreign investors feel secure about investing, transferring technology and developing products.