The Bondage Of Subcontracting
By Ngoc Lan
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| At a workshop of Samsung Electronics in Thu Duc Dist., HCM City. Export of electronics, computers and components in the first seven months reached US$1.82 billion |
Vietnam’s electronics industry has yet to move beyond subcontracting
Export of electronics, computers and components in the first seven months jumped by some 30% year-on-year to touch US$1.82 billion, thanks mainly to the commendable performance of such key items as printers and to local assemblers’ shift toward turning out products, the Ministry of Industry and Trade contends.
If this view holds true, it will be a cause of celebration for Vietnam’s electronics industry, which has relied on subcontracting for years. However, reality seems to suggest otherwise.
According to the General Department of Customs, printers remained the leading performer, posting export volumes and earnings of 900,000 units and US$65.7 million respectively in the first half and accounting for one-third of the export turnover reported. Runners-up included electronic components (US$15 million), computer RAM (US$14 million) and printer components (nearly US$6 million).
Laptops, which, according to the Ministry of Industry and Trade, are showing signs of change and are expected to alter the profile of Vietnam’s electronics export, reaped merely US$1.1 million, posted shipment volumes of nearly 6,000 units and ranked 12th in the list of exported electronic items. These products require local assemblers to import components from elsewhere.
Tran Quang Hung, general secretary of the Vietnam Electronics and Information Technology Association, declines to comment on the outcome of the perceived shift in production patterns. “Vietnam’s electronics industry has not achieved much. Up to 95-98% of its products are made by foreign-invested enterprises. Vietnamese firms contribute little in the process and should not take credit when none is due,” he says.
With the exception of printers, Vietnam’s leading electronic exports are components. The Ministry of Industry and Trade admits that motherboards are exported in large volumes, mainly to Hong Kong, and generated more than US$460,000 in the first six months, with Foxconn, which has a factory in Bac Ninh, as the main brand.
Vietnam’s electronic products are shipped mainly to East Asia (China, Japan, Hong Kong, Korea and Taiwan), with China as the leading export market. However, this hardly reflects the competitiveness of Vietnamese products. “The US$50 million which Vietnam’s electronic components and products generate in China per annum trails far behind the billions of dollars worth of electronic exports which China ships to other countries. Vietnamese assemblers can enter the market because the global electronic industry has embarked on specialization and globalization, under which Vietnam’s electronic exports are used for production elsewhere in the value chain. It is inadvisable to draw any conclusion about the competitive edge of made-in-Vietnam electronic items,” Hung says.
The claim that Vietnam’s electronic industry is changing for the better is therefore hasty. “The bondage of subcontracting remains even though export turnover has expanded,” he adds.