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Vietnam's supporting industry benefited amid Covid-19 outbreak

Vietnam's supporting industry benefited amid Covid-19 outbreak

Friday 20, 03 2020
Not only foreign enterprises having production plants in Vietnam but international manufacturers are also increasingly resorting to Vietnam as an alternative supplier.

Number of orders increased rapidly

Mr. Do Phuoc Tong, Chairman of Duy Khanh Engineering Co., Ltd, said that due to the interruption of supply due to Covid-19, there has been a European machine manufacturing enterprise based in Vietnam placing orders from this company to replace supply from China. This manufacturing enterprise has ordered 10 detailed samples of various products and currently Duy Khanh has also sent sample products to this customer for review on quality, design, etc. In fact, not many products of Vietnamese mechanical enterprises have been exported to the European market.

Meanwhile, Century Synthetic Fiber JSC, which has manufacturing plants in Ho Chi Minh City and Tay Ninh, said that in the first two months of this year, its sales increased by about 15% compared to the same period last year, partly due to increased orders from partners whose supply from China was cut due to the Covid-19 epidemic. Currently, the production facilities of Century Synthetic Fiber JSC have run at full capacity.

According to Ms. Nguyen Phuong Chi, Strategic Director, the company is receiving many new orders from Korean, Thai, Japanese, Taiwanese and American manufacturers. Ms. Chi said that FDI enterprises in Vietnam, which are customers of the company, have also increased orders after depending too much on supply from China. Le Nguyen Duy Oanh, Deputy Director of Ho Chi Minh City Center of Support Industries Development, also said that due to China’s supply cut, besides foreign-invested enterprises having factories in Vietnam, domestic manufacturers have also directly contacted the center for assistance in finding suppliers and ordering materials for production.

According to Ms. Oanh, due to serving many markets around the world, the demand of these manufacturers is huge. This is an opportunity for suppliers and manufacturers of Vietnam’s supporting industry to develop and expand the market.

Vietnam's supporting industry benefited amid Covid-19 outbreak

Not easy to seize the opportunity

Most businesses and analysts believe that after this epidemic, manufacturers in the world will not take risks by "putting all eggs in one basket" and being too dependent on supply from the Chinese market. Global manufacturers will diversify the supply market to distribute risks, and Vietnam is expected to have many opportunities to become one of those markets that can reduce that risk.

The above "ordering" actions by manufacturers also partly show that Vietnamese enterprises can increase their participation in the global supply chain. However, it is not easy for some other industries to seize this opportunity. The leader of Duy Khanh Engineering Co., Ltd said that the aforementioned European enterprises replacing the supply from China with supply from his company is not overnight.

The company does not worry about the quality of their products, however, Duy Khanh's products still cannot compete with components made in China in terms of price. According to Mr. Do Phuoc Tong, Duy Khanh also has to import raw materials to produce finished products, so the selling price will not be able to compete with that of businesses operating in the same industry in this country, which has local raw material sources that can meet quickly without shipping costs.

On the other hand, usually when manufacturers transfer orders to new suppliers, they only purchase in certain quantities. Therefore, it is difficult to compete with long-time suppliers of large quantities. Similarly, Ms. Oanh, said that it is difficult for domestic supporting industry enterprises to meet the orders of the above manufacturers because there are items with metal plating techniques that require the experts of the purchasing unit to directly instruct, monitor the testing process, and evaluate the environment, which is very demanding.

Meanwhile, due to the complicated and prolonged disease situation, which leads to limited travel between countries, domestic enterprises introduced to approach these manufacturers have not been able to meet them directly to discuss the implementation plan or technical support. Another difficulty, according to Ms. Oanh, is that most of the domestic supporting companies are small-scale, whose max production capacity is low and control of production costs is not high.

Notably, manufacturers always require quick and timely parts and accessories, which can be on weekly or even daily basis, while this is impossible for most domestic enterprises. Therefore, according to supporting industry enterprises, although the opportunities are immediate, their capacity is limited and they cannot produce many different kinds of goods due to lack of machines, technology and low labor qualifications, etc. This fact is not just happening.

However, it can be seen that the search for suppliers is not only limited to manufacturers in Vietnam but also to large manufacturers in the world in the context of disrupted supply from China. According to Ms. Oanh, in addition to the support of state management agencies and purchasers, businesses themselves must be determined to make efforts and need to change their management mind. Samsung has solved this problem in recent years and has made a number of domestic suppliers become direct suppliers for its projects in Vietnam today.

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Source: theleader

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