Manufacturers localise supply to circumvent chip shortages

A global chip shortage is creating more pressure for manufacturers in Vietnam as they deal with slowed-down production for electronics and tech products, 

while local and overseas players are racing to prepare new premises for the production of much-needed supply.

Last week, Vingroup officially announced the shutdown of VinSmart, its smartphone and TV production arm, to focus on its automobile unit VinFast. The move is not seen as a surprising one as Vingroup has also withdrawn from retail, agriculture, and aviation in recent times to focus its resources on smart homes and electric vehicles.

Vingroup also plans to introduce its version of electric cars in the United States in 2022, with the conglomerate reportedly mulling an initial public offering in the US for VinFast that could raise $2 billion.

According to Nguyen Viet Quang, vice president and general director of Vingroup, the smartphone and TV production market is highly saturated with low-profit margins so many big players like Sony, LG, and HTC have also quit the game. Moreover, the costs for smartphone production are increasing significantly due to the severe shortage of chipsets and the rising costs of accessories over the past year, making it difficult to compete.

In the first quarter of 2021, VinSmart accounted for a 10-per-cent market share in Vietnam but its annual growth had been stagnant, according to a report by Singapore-based market analyst firm Canalys. The supply of critical components such as chipsets has quickly become a major concern and will hinder smartphone shipments in the coming quarters.

Manufacturers localise supply to circumvent chip shortages
Manufacturers localise supply to circumvent chip shortages

Holding up sales 

The global shortage of chips is quickly spreading across different industries from smartphones to cars. On average, a car has between 50 and 150 of the semiconductors, which are used in a growing number of applications, including driver assistance systems and navigation control.

In Vietnam, a slew of car brands from Toyota, Kia, Mitsubishi, Mercedes Benz, and Suzuki have been affected by the problem. Most recently, Mitsubishi Vietnam has postponed delivery of the Xpander units due to the shortages. Meanwhile, Suzuki Vietnam announced that the volume of its XL7 and Ertiga models imported from Indonesia will be limited in the next three months because of slower production.

Other electronics manufacturers are also getting slammed by such shortages. Dang Van Chung, plant manager of Ho Chi Minh City-based Datalogic Vietnam LLC operating in Vietnam for 10 years, told VIR that the company has been in short supply of semiconductors since the end of last year. Datalogic is currently specialised in designing and producing barcode readers, mobile computers, and sensors, as well as vision and laser marking systems.

“We are trying to negotiate with our customers because we can’t deliver full orders for them. Furthermore, the industry-wide supply shortage also results in higher expenses and logistics costs for manufacturers. However, Datalogic is making efforts not to increase prices while looking for alternative suppliers in a desperate bid to keep supplies flowing,” Chung said.

Nguyen Tu Quang, CEO of Vietnam’s technology corporation BKAV, also pointed out the reasons behind the global chip shortage. He noted that Huawei Technologies has stockpiled critical chips amid the US-China trade tensions to ensure the supply to Chinese carriers in their rollout of 5G technology. Other Chinese manufacturers, fearing similar treatment, followed suit.

At the same time, the problem became worse in light of the unprecedented demand for semiconductors during the pandemic. National lockdowns saw a massive surge in the demand for virtual office devices such as laptops and network peripherals as companies scrambled to accommodate their employees in the mass shift to working from home.

 

“To overcome the challenges, technology manufacturers like BKAV are racing to find foreign suppliers who have changed their business plans and may have available components for sale. This sale and procurement of chipsets and electronic accessories is happening all over in the market,” Quang said.

Many chip producers and suppliers have reported shortages, warning that the delivery time could be extended to over 10 months.

Domestic development 

Semiconductor chips are used everywhere, from simple ones like Vietnam’s new identity cards to common household electronic devices such as televisions, refrigerators, induction cooktops, and rice cookers. Furthermore, Vietnam has the growing demand for chips given that the country is preparing to roll out 5G and accelerate digital transformation. Therefore, the global shortage will disrupt supply chains and the digital transformation efforts of Vietnam.

This multifaceted issue shows no signs of abating. In a recent blog, Glenn O’Donnell, vice president and research director at advisory firm Forrester, believed the shortage could last into 2023. “The PC surge will soften a bit in the coming year but not a lot. Data-centre spending will resume after a dismal 2020, and edge computing will be the new ‘gold rush’ in technology,” he said. “Couple that with the unstoppable desire to instrument everything, along with continued growth in cloud computing and cryptocurrency mining, and we see nothing but boom times ahead for the chip demand.”

To be proactive in the chip supply and avoid risks, Vietnamese telecom giant Viettel had the ambition to develop its semiconductors for the core networks for its 5G services, though it could be challenging for Viettel to realise this target as it requires accumulated efforts and years to bear fruit. Meanwhile, the company would need numerous different chips to build a reliable system.

Meanwhile, other foreign investors are looking to increasing chip production in Vietnam. Austrian chipmaker AT&S intends to develop two factories in Vietnam with an investment capital of nearly $1.8 billion in the first phase. Ingolf Schröder, director of AT&S, said that his company is confident it can implement the factory in a short time to serve the huge demand in the field. The chipmaker is hurrying to inaugurate its factory by the end of the year.

In January, Danang Hi-Tech Park Management Board also granted an investment certificate to the US’ Hayward Quartz Technology to develop a semiconductor factory with the total investment capital of $110 million in the central city. Hayward Quartz Technology is based in Silicon Valley and a leading supplier supporting all major original equipment manufacturers in the semiconductor segment.

Covering an area of over 102,000 square metres, the Hayward factory is designed in two phases. The first has an area of more than 61,000sq.m with the investment capital of $66 million. The project is expected to begin construction in the second quarter of 2021 and be put into operation in the second quarter of 2023.

Also, Intel Corporation has invested a further $475 million in Intel Products Vietnam. This new investment comes in addition to $1 billion of funding to build a state-of-the-art chip assembly and test manufacturing facility in Saigon Hi-Tech Park, which was first announced in 2006.

VIR

Great opportunity for Vietnam's semiconductor industry

Great opportunity for Vietnam's semiconductor industry

The scarcity of chip supply that began in late 2020 has affected most manufacturing industries.

Lack of semiconductor chip to affect car sales

Lack of semiconductor chip to affect car sales

The global vaccination led to a positive economic outlook, resulting in faster and stronger demand for car.

 
 

Other News

.
Debt burden risks budget stability
Debt burden risks budget stability
BUSINESSicon  29/05/2021 

Vietnam has had outstanding economic development in recent decades, even through the pandemic so far. 

Paint makers’ fresh coat of progress
Paint makers’ fresh coat of progress
BUSINESSicon  29/05/2021 

Having one of the fastest-growing paint and coating industries in the Southeast Asian region, Vietnam is mainly dominated by international paint and coating groups, but it is now witnessing a refresh as local makers attempt to gain some traction.

'Black-credit' lenders pose serious threat to borrowers
'Black-credit' lenders pose serious threat to borrowers
FEATUREicon  28/05/2021 

Experts have repeatedly rung the alarm bell over black credit, which is causing serious consequences to families and society.

PDP8 delay to unlock more cost-effective renewables
PDP8 delay to unlock more cost-effective renewables
BUSINESSicon  28/05/2021 

The past 12 months have been a period of intense activity for Vietnam’s power sector.

Inefficient State-invested projects must be removed from list: PM
Inefficient State-invested projects must be removed from list: PM
BUSINESSicon  27/05/2021 

The Cabinet leader recently issued a directive urging relevant agencies and localities to accelerate public investment disbursement and improve the quality of the mid-term public investment plan between 2021 and 2025.

Great investment opportunities in cold storage
Great investment opportunities in cold storage
BUSINESSicon  27/05/2021 

The rise of online shopping is driving demand for cold storage facilities, a segment that is severely short of supply around the world.

Vietnam to spend $124.5 billion on public investment over next five years
Vietnam to spend $124.5 billion on public investment over next five years
BUSINESSicon  27/05/2021 

Vietnam plans to outlay 2.87 quadrillion VND (124.5 billion USD) on public investment in the 2021-2025 period, up 120 trillion VND compared to the previous estimate.

Moody's affirms credit ratings for four Vietnamese banks
Moody's affirms credit ratings for four Vietnamese banks
BUSINESSicon  27/05/2021 

Credit rating agency Moody's on May 26 affirmed its long-term domestic and foreign currency deposit and issuer ratings of four Vietnamese banks.

Vietnam’s energy giant sets ambitious revenue of $1.2 billion
Vietnam’s energy giant sets ambitious revenue of $1.2 billion
BUSINESSicon  28/05/2021 

The PetroVietnam Power Corporation (PV Power) aims to earn VND28.4 trillion of revenue (US$1.2 billion) and pre-tax profit of nearly VND1.55 trillion this year.

Tax tweak puts strain on apparel makers
Tax tweak puts strain on apparel makers
BUSINESSicon  27/05/2021 

On-spot exports are now not subject to duty exemption, possibly derailing the recovery of textile and footwear companies.

Electricity prices still not falling despite oversupply
Electricity prices still not falling despite oversupply
FEATUREicon  27/05/2021 

The Electricity of Vietnam’s (EVN) latest report showed that the Covid-19 pandemic has led to a decrease in electricity demand. The real electricity output in 2020 was 247 billion kwh and the additional charge growth rate was 3 percent.

Goods face strict customs inspections as smugglers continue to violate laws
Goods face strict customs inspections as smugglers continue to violate laws
FEATUREicon  27/05/2021 

The General Department of Customs (GDC) said that risks in transit services continue to exist as smugglers try to carry prohibited goods into Vietnam.

Economist proposes measures to support enterprises in tough times
Economist proposes measures to support enterprises in tough times
FEATUREicon  28/05/2021 

Pham The Anh, chief economist at the Vietnam Institute for Economic Policy Research (VEPR), believes that social security support must be given to people who have had to shut down their business or have lost jobs because of lockdowns.

San Diu ethnic farmer grows the most expensive litchis in Vietnam
San Diu ethnic farmer grows the most expensive litchis in Vietnam
FEATUREicon  28/05/2021 

Tran Van Hanh, who lives in Chao hamlet, Luc Ngan district, Bac Giang province, one of the two largest litchi growing areas in Vietnam, owns an orchard that grows the most expensive litchis in the country.

Vietnam's post-pandemic economy
Vietnam's post-pandemic economy
FEATUREicon  27/05/2021 

As the Covid-19 pandemic persists, Vietnam's economy will still face many difficulties, but the country has the potential to increase productivity and develop at a higher rate than many other countries.

Oddest bank in Vietnam: No CEO, chairman takes office for two hours
Oddest bank in Vietnam: No CEO, chairman takes office for two hours
BUSINESSicon  27/05/2021 

The nearly decade-long war for power at the Vietnam Export Import Commercial Joint Stock Bank (Eximbank) may be coming to an end. 

VIETNAM BUSINESS NEWS MAY 28
VIETNAM BUSINESS NEWS MAY 28
BUSINESSicon  28/05/2021 

Food companies pressured by soaring raw material prices

Share prices rise, strong cash flow emerges
Share prices rise, strong cash flow emerges
FEATUREicon  26/05/2021 

Vietnam’s stock market made a spectacular breakthrough in the first months of the year with the VN Index staying at the 1,200 point threshold and some blue-chip prices strongly increasing.

Taxing unoccupied villas: one solution for creating fair housing market
Taxing unoccupied villas: one solution for creating fair housing market
FEATUREicon  26/05/2021 

A reasonable taxation policy is expected to help settle several problems, including excessive investment in high-end apartment and villa projects, and speculation buying.

Media tycoon has no way out after suffering losses
Media tycoon has no way out after suffering losses
BUSINESSicon  26/05/2021 

The VN-Index has been in the top of the world's strongest stock indexes since the beginning of the year with an increase of more than 16%. Over the past year, the index has increased by nearly 50% despite the Covid-19 pandemic.

 
 
 
Leave your comment on an article

OR QUICK LOGIN