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Vietnam urged to prepare for the 4th industrial revolution

The Global Industry 4.0 Survey, the largest research of its kind and conducted last year by PricewaterhouseCoopers (PwC) on over 2,000 companies in nine major industrial sectors from 26 leading countries, revealed that companies expect Industry 4.0 to reduce operational costs by 3.6 per cent per year while increasing efficiency by 4.1 per cent annually. Automation has already, in fact, been changing global manufacturing for some time and Vietnam has also been subject to its effects.

The country’s major corporations have been looking at applying advanced technologies and replacing their human workforce with machinery and robots in certain industries, to raise productivity, reduce production time, and optimize labor costs.

Mr. Isara Burintramart, Managing Director of Reed Tradex, ASEAN’s leading exhibition organizer, underlined the increasing dynamism of Vietnam’s industry.

“Vietnam’s manufacturing has been moving away from the traditional portfolio into higher value-added products,” he said.

“We have seen growth and changes in industries we serve throughout the past ten years, and the changes and the growth will certainly continue, especially now that we are all living in the digital age and are moving towards the ‘Industry 4.0’ era.”

Much concern

The development of the fourth industrial revolution, or Industry 4.0, along with increasing perfection in robotics production driving global industry towards robotics and automation, is the future but also a concern for many enterprises.

A survey conducted by VET recently on more than 2,000 SMEs that are members of the Vietnam Association of Small and Medium Enterprises, found that 85 per cent expressed concern with Industry 4.0. Of these, 55 per cent believed it would have a significant effect on Vietnam’s economy, 23 per cent believed its impact would be moderate, 11 per cent believed it would have no major influence, 10 per cent said it would have no impact, and the remaining 6 per cent had no idea.

In terms of strategy, it is notable that up to 79 per cent of respondents said they haven’t done anything to prepare for Industry 4.0.

Fifty-five per cent said they have been seeking information or conducting research, while 19 per cent have set up plans and only 12 per cent have actually been implementing strategies.

Sixty-seven per cent of respondents believed they would not be overly affected by Industry 4.0, 56 per cent believed their business sector would not be overly impacted, and 76 per cent said they didn’t understand the nature of Industry 4.0. More than a half (54 per cent), said they didn’t believe they needed to care about it.

Nevertheless, another quick survey conducted at the CEO Forum held by VET last month revealed that 67 per cent of participants and enterprises present believe that Vietnam cannot catch up with this industrial revolution and only 33 per cent were optimistic about the prospects of keeping pace with it.

According to Mr. Ngo Van Tuan, Deputy Head of the National Assembly’s Economic Committee, in terms of business manufacturing, Industry 4.0 allows enterprises a greater degree of freedom and flexibility in their production.

The boundaries between traditional industries and between industrial and non-industrial appliances will fade.

“Industry 4.0 will contribute to redefining the value chain in business models as a result of a complex and connected manufacturing network,” he said. “At the same time, the human workforce will require interdisciplinary thinking, social skills, and other technical skills.”

Concern among interested smes about industry 4.0

Source: VET survey 2017

Preparation needed

Industry 4.0 is considered a transformation, not an overnight change, so enterprises need to actively prepare their resources. South Korea’s Doosan Vina, one of the largest overseas manufacturing conglomerates, has been planning and preparing their human resources and production facilities for this revolution in recent years.

In investing $300 million and employing 2,500 staff during its decade in Vietnam, the company has recruited and trained its staff and its equipment is state-of-the-art and the most advanced in heavy industry.

For example, Doosan has been integrating its manufacturing with Industry 4.0, with engineering and design software linked directly to massive multi-million dollar robotic CNC machines.

By connecting the design software straight to computer-driven cutting machines, precision is exact and perfectly mirrors design requirements.

“Doosan Vina plans to continue seeking out the best solutions that are green, scalable, and cost effective to the company’s needs for power and water,” said Mr. Jung Yeon, CEO of Doosan Vina.

“These are both critical factors in a country’s economic development and quality of life. Our corporate R&D is leading the way with cutting edge technology for the industry and other sectors that will be focused on in the years ahead.”

Industry 4.0 has been drastically changing current business models as technology and consumer demand change rapidly in multiple dimensions, according to Mr. Masaaki Kobayashi, Managing Director of Panasonic Vietnam.

As one of the world’s leading manufacturers of consumer electronics, “Panasonic sees the fourth industrial revolution as bringing us great opportunities to develop and take a technological pioneering role in pursuit of a better world,” he said.

“Kaizen”, an economic term originating from Japan that means “continuous innovation”, has spread to many countries in global industry with impressive results. It has been considered a business strategy and a spirit bringing success to Japanese people.

Viewing Vietnam as a key market for investment, manufacturing, and R&D, Panasonic’s six plants in the country focus permanently on Kaizen activities in three regards: process automation, M2M connectivity, and manufacturing operations management.

The company’s target is to offer a variety of infrastructure solutions that shows the results of its Industry 4.0 investment and proves its pioneering position in the industry. In human resources management, according to Mr. Kobayashi, focusing on investment in personnel by enhancing training activities can improve working skills and experience in order to create a dynamic business and manufacturing environment suitable for the transformation of Industry 4.0.

According to Mr. Hyun Woo Bang, Vice President of Samsung Vietnam, the transformation in the global manufacturing industry through automation in processes, linking real and virtual systems, and converging advanced technologies, are common global trends and Vietnam is no exception.

“The application of information technology in the country’s key industries, supporting the development of heavy industry as well as other industries, is also the method that most enterprises have been trying to put into practice in order to save time and costs,” said Mr. Yang Kun Hsiang, General Director of Vedan Vietnam.

Impact of industry 4.0 on uninterested smes


Opportunities vs. challenges

Vietnam’s manufacturing industry has made significant changes over the last few years.

The latest Cushman & Wakefield (C&W) Manufacturing Risk Index Report 2016 ranks Vietnam in second place in the global Pioneering Locations Index, behind only Costa Rica.

It ranks the 30 “established” markets that are the largest by manufacturing output, as defined by the United Nations Conference for Trade and Investment (UNCTAD), and also covers the Top 10 pioneering nations, made up from those that currently do not have the largest output but are considered to have the most potential to mature.

This indicates accelerating manufacturing production, increased output across all sectors, and rising new business, as well as markedly improved confidence among manufacturers about rising output.

The Index is a reflection of improvements that Vietnam has made and continues to make to how business is conducted in the country.

Particularly in the manufacturing and industrial sectors, rather than seeing a hangover from the cancelled TPP, it sees legacy benefits building confidence for overseas investors and companies, according to Mr. Alex Crane, General Manager of C&W Vietnam.

However, “to be realistic, Vietnam’s current manufacturing level is either at the Industry 2.0 or Industry 3.0 stage and relying on low-skilled jobs to drive industry has resulted in missing earlier technological waves due to a lack of awareness, demand, skills, infrastructure, or funding,” said Mr. Burintramart from Reed Tradex.

“There are also many other drivers that will assist manufacturers in becoming players in the Industry 4.0 era, and among drivers such as government, data analytics, and economics is human resources.”

Vietnam has so far been competing internationally based on low labor costs. The government has expressed a desire and need to move away from a labor-intensive economy towards technology and value added areas.

But unless there is real, implemented protection of intellectual property rights, investors are unlikely to bring their technology to Vietnam, and Vietnam will remain in the low labor cost trap, according to Mr. Vo Quang Hue, Vice Chairman of EuroCham Vietnam.

“This is worrying for both European businesses and the Vietnamese Government, because if those issues are not addressed, then foreign investors simply will not invest,” he said.

He also commented that low-cost labor has turned out to be less of a priority for foreign companies when making a decision to enter Vietnam.

In fact, more investors, especially those of large-scale and with high-tech projects, are looking for qualified Vietnamese employees who can be key to their success in the growing market.

It seems that a lack of capable employees has become a chronic issue, causing some companies to hesitate in making sizable investments in the country, he added.

Meanwhile, Mr. Kobayashi said that Industry 4.0 can impact to a certain extent on the labor market, depending on preparations and training in adapting.

“Automation and robots can replace manual jobs and a basic-skilled workforce, but it also generates high demand for skilled labor and talented leaders,” he said.

“This is a challenge but also an opportunity for investing in the development of skilled labor and fertile ground for breakthrough, creative thoughts. The fourth industrial revolution is not actually a competition between automation and humans.”

Mr. Nguyen Van Thu, Chairman of the Vietnam Association of Mechanical Industry (VAMI), said that Industry 4.0 should start with small and simple steps but needs to be implemented immediately, and most important is investing in human resources.

Manufacturers should then boldly innovate technology with a ready state of mind and there must be tight cooperation to maximize the efficiency of enterprises and its workforce.

VN Economic Times

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