Singapore and South Korea followed IT industry strategies that reflected dominance of in-house manufacturing.

Singapore developed its IT supply chain by supplying parts and services to multi-national corporations (MNC) that established in-house manufacturing facilities in Singapore. Whereas, South Korea primarily built-up its IT industry supply chain by reverse engineering company products already in the marketplace while manufacturing them in Korean-owned companies.

So, Vietnam had to consider how its Vietnamese IT industry supply chain would fit into the global supply chain. What Vietnam decided on was accomplishing this through varying stages of production being associated with different sourcing arrangements. Currently, many of Vietnam’s imported electronics components are sourced from China, Japan, South Korea, and Taiwan with high tariffs.

As tariffs on electronics components into Vietnam (currently ~30%) become more reasonable, interest in Vietnam as a destination source for offshoring and outsourcing contract manufacturing services should grow larger.

Meanwhile, the Vietnamese government continues to try and make Vietnam an attractive destination for electronics manufacturing. Overall production of electronics goods continues to increase. From 2000 to 2004, electronics production grew 25% per year.

Vietnam electronics contract manufacturing challenges

Some of the challenges facing Vietnam’s electronics industry include:

• power (much of Vietnam’s electricity is generated from hydropower which can have a questionable supply consistency due to prevailing weather conditions. This can create trying conditions given high electricity consumption rates associated with technology manufacturing).
• IP (intellectual property) rights can be considered weak
• Vietnam’s transportation system is in relatively poor condition with less than 45% of its roads topped with asphalt
• Questionable funding to support Vietnam’s railroad infrastructure
• Telephone calls into the country, from North America, can be difficult to connect at times

A few of the electronics companies currently committed to manufacturing in Vietnam include Intel, Canon, and contract manufacturing and design companies Jabil Circuit, Spartonics, Mechatronics Engineering Group and, MiTAC Precision Technology.

(Source: www.ventureoutsource.com)