The electronic component industry is the supporting industry which is important to the development of the electronics.
World’s Total production value has surged since 2012 but seemed to slow down in 2014 and it was 578 billion USD in 2015. This is due to the USD rising along with the interest expectation while the American economy is slow down, which affect the industry development. Besides, the outputs industry - Electronic industry also slowed down due to the plummet of oil price since the second half of 2014.
The global electronics market has long been controlled by developed economies like America, Japan, and some EU countries. Following countries struggled in accessing and participating into the market. In order to do this, they have to pass multinational companies. In the last decade, India and China are named the global workshops; however, recently with the emergence of Vietnam, multinational companies are considering the plant movement to Vietnam due to low labor cost and investment and trade incentives.
In 2014, electronics industry production value was 403 thousand billion VND, accounting for 9.5% in value of the entire industry.
Vietnam’s electronic component industry is young and just operates in the outsourcing aspect through importing basic electronic parts and then assembling to specialized ones and then export. Hence the added value is low, only 5-10% mainly due to the advantage of low cost of labor.
Supporting industry and component production in Vietnam are not yet developed because of the high capital investment requirement. In addition, for a long time, component import tax is below 5% (according to AFTA and WTO), lower than the tariff of import goods to produce the components; hence, leads to the increasing imbalance between assembling and component production.
With the participation of Vietnam into many FTAs in upcoming time, notably TPP, will attract foreign investment strongly, incenting direct investment capital source and the technology transfer, improve management skills, and raise efficiency of business. As the capital continues to flow and Vietnam becomes the choice of many big companies such as Electronics Viet Nam, Samsung, United More SDN.Bhd (Malaysia), Vietnamese enterprises will have the chance to receive the technology transfer from FDI. However, joining TPP allows to less requirements of imports, tariff will be reduced to 0%, making import goods very cheap and will pressure down domestic companies. If Vietnamese policy makers cannot navigate correctly and companies don’t put their efforts to meet demand of TPP market, Vietnam market will be lost to FDI and imported goods.
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