Vietnam Industry 4.0 -Manufacturing, Factories and Logistics

The Fourth Industrial Revolution, a fusion of digital, physical and biological technologies, the internet of things and artificial intelligence, is taking place all over the world and having a strong impact on all aspects of socio-economic life, leading to changes in production methods and workforce structures. It can be said that industry 4.0 is bringing both golden opportunities and huge challenges to developing countries in general and Vietnam Is no exception. According to Minister of Planning and Investment Nguyen Chi Dung, technology trends and the Fourth Industrial Revolution provide a marvellous opportunity for development if we know how to unlock potential advantages and strengths of Vietnam.

The earliest traces of the discussion about Industrial Revolution 4.0 in Vietnam date back to the media coverage of the World Economic Forum (WEF) taking place in January 2016. The Government issued Directive 16/CT-TTg dated May 4, 2017 on improving access to the Fourth Industrial Revolution. Prime Minister Nguyen Xuan Phuc asked the Ministry of Planning and Investment to develop the National Strategy on Industrial Revolution 4.0, the Ministry of Science and Technology to formulate the science and technology and innovation report 2035 and each ministry and locality to design an action plan in line with the industrial revolution 4.0.

Factories, manufacturing and logistics are areas that industrial revolution 4.0 could impact.

Smart Manufacturing

Smart manufacturing is changing the way we manufacture, utilize, operate and maintain our products globally. This change is reducing the competitive advantage of places that have been based on cheap labor and natural resources. In Vietnam, the development of the digital economy and smart industry is considered by the Government as a key task to restructure the economy and transform the growth model towards productivity, efficiency and competitiveness.

Recently, FPT Software (the largest information technology service company in Vietnam) and Toshiba Digital Solutions signed a Memorandum of Understanding (MoU) to deploy industrial IoT solutions for manufacturing industry. According to MoU, both sides will join hands to help manufacturers adopt integrated smart factory solutions –Toshiba’s SPINEX Meister series – on a global scale.

In the trend of Industrial Revolution 4.0, smart manufacturing is the perfect combination of IT and manufacturing technology to optimize processes to meet the dynamic transformations of the market. Although Smart Manufacturing is a long process, it must be started right now. And smart factory is the first step.

Smart Factory

The core of the Fourth Industrial Revolution is “smart manufacturing plants”, Deputy Minister of Industry and Trade (MoIT) Cao Quốc Hưng has said. Smart factories help enterprises save costs on energy and maintenance and increase new earnings by providing personalized products and services to customers. Smart factories represent a tremendous evolution from a traditional automated production system into a system which can continuously connect and process data. Analysts predicted that smart factories would make up 5 percent of total output in the globe by 2025 and bring profit of $70 billion.

In Amberd City, Siemens runs a smart factory. In 1990, only 25 percent of the production line of the factory was automated, while the proportion is now 75 percent. The proportion of error products is always low – 11.5 for 1 million products. In June 2017, Samsung SDS concluded a strategic agreement with CMC, the second-largest ICT service company in Vietnam, to promote Smart Factory business in Vietnam. At Samsung’s factory in Bac Ninh province, 6,000 robots are working on the assembly line. Vinamilk, the nation’s leading dairy producer, has spent VND2.4 trillion to organize an automatic production line. At its factories, the transportation and sorting of goods are done by robots.

Smart Logistics

According to statistics from Vietnam Logistics Association (VLA), there are over 1,300 logistics enterprises operating in the country, including foreign-invested enterprises. Logistics services in Vietnam currently have a value of $20-22 billion per year, accounting for about 20.9 per cent of the country’s GDP.

Logistics companies will need to be more technologically advanced than ever—this new industrial era will push the logistics industry to become much “smarter” and more adaptable. With Industry 4.0, logistics companies will need to take a closer look at how operations and infrastructure can be improved through technology and innovation.

On July 14, 2017, Samsung SDS Co., Ltd., a subsidiary of Samsung Group, established a joint venture with MP Logistics (one of the biggest providers of logistics services in air and ocean freight, warehousing, distribution, project cargo, and inland transportation in Vietnam) with the aim of expanding its logistics business in Vietnam. Previously in 2016, Samsung SDS had established another joint venture with Aviation Logistics Corporation (ALS), one of the leading aviation logistics service providers in Vietnam. With this new joint venture, Samsung now has the right to manage the cargo terminals in Noi Bai International Airport.

Opportunities for International Companies

According to Savills, Vietnam attracted FDI flows of $35.6bn in 2017, up a hefty 44.4% from the previous year, with Japan the biggest, contributing $9.11bn. Manufacturing and processing FDI made up 44.2% of the total.

Trade policy has arguably been the most important industrial policy for Vietnam. With Singapore, it shares the top spot in East Asia of being a member for bilateral and multilateral free trade agreements. A signatory to 16 bilateral and multilateral free trade agreements, Vietnam is a member of the World Trade Organization, ASEAN, and has concluded bilateral agreements with the U.S., Japan, South Korea, the EU, and the Eurasian Customs Union. Earlier this year, it became one of 11 countries to join the revived Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). It is estimated that more than 10,000 foreign companies—including major global players such as Samsung, Intel, and LG—operate in Vietnam today, mostly in export-oriented, labor-intensive manufacturing.

Key stakeholders from Vietnam government and Enterprise will be providing further insights of their Industry 4.0 strategy and initiatives at the 26th edition of Asia IoT Business Platform in Ho Chi Minh City this November 12-13th. If you want to know more about the industrial sector updates and business opportunities in Vietnam, do drop me email at [email protected].

Maisie Chen

23 August 2018

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