Weak technology and limited financial capacity have hindered local vietnamese enterprises from participating in the production chain of big foreign investors like Samsung, Toyota or Intel, leaving the manufacturing of components to foreign suppliers; and while Samsung’s recent expansion in Vietnam saw the opening of 100 component providers for its factories, only seven of those firms are Vietnamese. The rest are foreign companies, mainly from South Korea or other South East Asian countries. 

Similarly, Intel has only 18 Vietnamese partners among the hundreds that provide materials and components for its operations. The situation is the same for Toyota; only two of the 12 suppliers to its operations in Vietnam are local firms.

The director of a component producer in Ho Chi Minh City said: “Local fledgling firms have found it hard to find customers and require government help. State agencies could meet with representatives from foreign-invested enterprises or send them lists of components that local firms can provide.

Without the introduction, foreign firms will select traditional partners in their global production chains or those from their home countries.” He also admitted that Vietnamese firms are too weak in terms of technology and capital to meet the criteria set by foreign producers.

Samsung Vietnam recently met with local companies; and while hundreds participated in the meeting, most of them could not meet the criteria for even simple components like screws, chargers and keyboards.

To become a Samsung supplier, local enterprises must have patented technology, R&D facilities, and ISO certification for their product quality. They must also be able to ensure on-time delivery.

Nguyen Mai, former vice-minister of Planning and Investment, said that costs for local businesses are much higher than for foreign ones, because the former have to pay interest rates of some 10%, while the latter can access loans in their home countries for only 2-3%. “Without state support, local enterprises can’t compete with existing foreign suppliers,” he said.