Hanoi (VNA) -Although Vietnam is the world’s 12th largest exporter of electronicsand the third largest in ASEAN since 2015, up to 95 percent of the country’selectronics output comes from foreign-owned enterprises instead of domesticones, the Central Institute for Economic Management (CIEM) has announced.

With Vietnam’s expected 2017 electronic export turnover exceeding 70 billionUSD, the CIEM noted that foreign companies operating in the country account forthe lion’s share of the value, with domestic companies producing relativelylittle. 

The continuing weakness of the electronics industry, even as it is relativelylarge, sparked heated discussion at the Conference on the Development of Vietnam’sElectronics Industry on November 28.  

Cao Bao Anh from the Industry Department under the Ministry of Industry andTrade (MoIT) emphasised that the development of Vietnam’s electronics industryhad been imbalanced, with consumer electronics such as audio-visual equipmentand entertainment facilities dominating the market.

Without a long-term development strategy, the electronics industry in Vietnamwould lose significant market share at home, warned Bao Anh.

Bao Anh also noted that the MoITfound the electronics sector’s overall return on investment to be low, as thenational Incremental Capital-Output Ratio (ICOR) coefficient is below that ofother countries such as Thailand, Malaysia and China.

The electronics sector has to import about 77 percent of their products’ addedvalue, meaning that the domestic supply of electronic components is very low.The country produces mainly a few mechanical spare parts and simple componentsmade from plastic and rubber, according to a 2016 survey by the SupportingIndustry Enterprise Development Center (SIDEC) quoted by the CIEM.

Research and product design development for Vietnamese enterprises is stillweak. As a result, most Vietnamese firms only outsource foreign products, neverventuring to develop their own products.

The report also states that first-tier suppliers to the electronics sector aremostly FDI firms.

Household electronics accounts for about 80 percent of output and about 30 percentof total revenue. Only 20 percent of output is comprised of specialisedelectronics products, according to Nguyen Thi Tue Anh, CIEM Deputy Director.

She also warned that the localisation rate of products only reached 20 to 30 percent,meaning most of the products on the electronics market are now importedcompletely or assembled with imported components.

"Domestic enterprises are only involved in packaging, or producinglow-cost components that do not carry much added value," said Tue Anh.

The CIEM’s findings show that after more than 30 years of development, Vietnam’selectronics industry is still in the process of outsourcing for foreign brands.Domestic electronics companies are producing outdated products for low profitsand only 5 to 10 percent of added value annually.

Meanwhile, electronics- and electrical appliances-producing FDI enterprises arefacing pressure to reduce costs, as the number of supporting enterprises in Vietnamis still very low compared to the number of assemblers, and the quality ofproducts is disputed.

The total mobile phones and accessories produced in the country in 2016 wereworth more than 34 billion USD, with foreign-invested enterprises accountingfor 99.8 percent of the value.

"This means most FDI enterprises have to import parts from neighbouringcountries or directly from their country of origin," Tue Anh noted.

She nonetheless acknowledged that Vietnam’s electronics industry played animportant role in the country’s economic development. Though it got off to aslow start compared to a number of other industries, it had grown rapidlyover the years.

As cited by the CIEM, data from the General Statistics Office for the periodfrom 2012 to 2016 show that the domestic electronic products consumption indexwas consistently high, peaking between 2012 and 2013 and stabilising in the2014-2015 period.

In 2016, although the consumption index of electronic products decreasedsharply over the previous year, it was still significant in comparison with thetotal manufacturing industry consumption index.

The number of jobs in the electronics industry increased seven times in eightyears, from 46,000 in 2005 to 327,000 in 2013, and to 500,000 in 2016.

Such high demand for electronic products is a good sign for efforts to promote Vietnam’selectronics industry.

In order to improve the efficiency of the electronics industry, Bui Bai Cuongfrom the Ministry of Information and Communication said that in the future, itis necessary to focus on research and development, define the sector’sdevelopment strategy, focus on identifying core products and generatebreakthroughs to promote faster and more efficient products.

He also noted that implementation of supporting industry development policiesis slow. The industry faces a significant shortage of high quality humanresources and lacks investment especially in the electronics industry’ssupporting manufacturing sector.

The forum was organised by the CIEM, with attendance by representatives frombusiness associations, universities and government departments.-VNA