Untapped Potential in Vietnam’s Supporting Industries
According to the Ministry of Industry and Trade, Vietnam currently has over 6,000 supporting industry enterprises, primarily operating in sectors such as mechanics, electronics, textiles, and footwear. However, nearly 88% of these are small and medium-sized enterprises, mostly using outdated equipment and lacking quality standards. Only about 10% have adopted automation, and less than 20% hold ISO certifications or implement modern management models like 5S, Lean, or TQM.
Leaders of the Ho Chi Minh City Supporting Industries Association note that most domestic enterprises only participate in low-value-added processing stages, making it difficult to access large-scale, high-standard orders from leading corporations.
The localization rate in many key industries remains low. Specifically, textiles and footwear achieve 45–50%, mechanical engineering 15–20%, and automobile assembly 5–20%, falling short of the 40% localization target. Despite the presence of major electronics corporations, the proportion of components produced in Vietnam is limited. This highlights a significant gap in the industrial ecosystem, emphasizing the urgent need for deeper investment to enhance domestic production value.
Workers in Kumho’s factory. Photo: Huong Chi
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Mr. Haruhiko Ozasa, Chief Representative of the Japan External Trade Organization (JETRO), stated that the localization rate of Japanese enterprises in Vietnam (including both Japanese supporting industry enterprises in Vietnam and Vietnamese domestic enterprises) is 36.6%, comparable to Malaysia and the Philippines. According to Mr. Ozasa, in 2024, the weakening yen increased supply from Japan by 2.7 points compared to the previous year, reducing the localization rate in Vietnam.
Mr. Ozasa noted that, when considering Vietnamese enterprises separately, their supply to Japanese companies accounts for only 15.7% of the total supply (a 1.5-point decrease from the previous year), which is very low. Compared to Indonesia, Thailand, and Malaysia, Vietnamese enterprises still face significant limitations.
According to JETRO’s Chief Representative, 56.1% of Japanese enterprises operating in Vietnam plan to expand their investments, far exceeding ASEAN’s average of 37.7%. Notably, 50.9% of these companies intend to increase procurement in Vietnam, the highest rate among ASEAN countries. Sectors such as electrical equipment, electronics, textiles, and machinery show a strong demand for expanding local supply.
Mr. Hashimoto, Chairman of Sharp Corporation (Japan), announced that the company is exploring investment opportunities in southern Vietnam to shift its supply chain. He praised Ho Chi Minh City and Binh Duong Province for their attractive investment environments, aligning with Sharp’s criteria. The corporation already operates two factories in the Vietnam-Singapore Industrial Park (VSIP).
According to Mr. Vo Son Dien, Chairman of the Ho Chi Minh City Supporting Industries Association, the city excels in information technology with a vast workforce. Integrating information technology into manufacturing will create new advantages, strengths, and competitive capabilities for supporting industry enterprises.
Workers in a factory in Ho Chi Minh City. Photo: Huong Chi
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Key Policies Needed
Leaders of the Ho Chi Minh City Supporting Industries Association identify five key sectors within the industry: mining, processing, manufacturing, assembly, and maintenance. Among these, manufacturing (also known as supporting industries) encompasses four major groups—electronic components, mechanics, plastics, rubber, and accessories—forming a massive industry.
Experts highlight the industry’s vast potential, but it remains underutilized. Vietnam’s industrial development contrasts with that of developed nations. While they focus on manufacturing before assembly, Vietnam primarily engages in assembly without manufacturing, leading to dependency.
A leader from a supporting industry enterprise shared with reporters that, in addition to existing policies, a special mechanism is required. This includes dedicated land for supporting industries, initially free of charge until enterprises become profitable. A specialized agency for supporting industries should serve as the central management body, with a distinct “law” governing the sector’s development. Only then can the industry meet expectations.
Echoing this view, Mr. Nguyen Tu Quang, CEO of BKAV, suggested tailoring policies to local characteristics to determine suitable industries and attract relevant enterprises. A national materials program should focus on domestically produced materials currently imported in large quantities, enhancing Vietnam’s self-reliance and reducing dependence on foreign suppliers.
Huong Chi
– 09:49 24/11/2025
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