Mechanical enterprises go deep into the production chain

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2325 2043 15  5753 IMG 2277 - Mechanical enterprises go deep into the production chain
Mechanical enterprises must increase links, go deep into the chain of links to create sustainable development. Photo: H.Diu

Linking, supplying for FDI enterprises

Recently, the consortium of contractors Semco Maritime A/S (Denmark) and PTSC Marine Mechanical Services Co., Ltd (PTSC M&C) have signed an agreement by Hai Long Offshore Wind Power Company (Taiwan – China) to build two offshore substations under Hai Long 2 and Hai Long 3 Wind Power Projects in Taiwan. The scope of work includes design, procurement, fabrication and commissioning for two offshore substations with a total volume of about 18,000 tons. In this consortium of contractors, PTSC M&C will be responsible for the design of the base, procurement of some items of materials, and construction of all project components at PTSC M&C’s construction site in Vung Tau from late 2022 to early 2024.

Currently, many enterprises, including mechanical enterprises, are affected by the Covid-19 pandemic, but THACO AUTO has made efforts to maintain production, boost domestic supply and export.

It is expected that in 2021, the company’s export revenue of spare parts and mechanical components will reach more than US$34 million, the domestic market revenue will reach more than VND500 billion. In the first eight months of the year, the total export value reached US$21 million, an increase of more than 70% compared to the same period in 2020.

For the domestic market, THACO AUTO has developed suitable products, promoted the supply chain of components, spare parts and mechanics for many automakers, motorcycle makers and foreign-invested enterprises (FDI) such as Hyundai, Toyota, Isuzu, Piaggio, Amann, Makitech.

Revenue in 8 months increased by more than 50% compared to the same period last year.

In particular, the representative of THACO AUTO also said that, facing urgent requirements for supplies and equipment amid the pandemic, the company has researched and manufactured components, equipment, and auxiliary systems for specialized vehicles such as vaccine transport vehicles, mobile testing vehicles.

In addition, the most concerning problem of the mechanical industry is the lack of connection between FDI enterprises and domestic enterprises. But in many localities, with the attention of the authorities, the association has achieved many positive results.

For example, in Vinh Phuc, by helping connect the supporting industry and high-tech manufacturing enterprises in the area with large enterprises and suitable FDI enterprises, it has helped to attract more than 40 supporting enterprises for four FDI enterprises; some private enterprises in the province have established links, cooperation and regular supply of some products for FDI enterprises in the field of manufacturing, mechanical engineering.

Beware of the “growth trap”

Many mechanical enterprises reflect that the Covid-19 pandemic has made raw materials scarce and increased transportation difficulties such as lack of empty containers, high freight rates, congestion at ports.

In the face of such difficulties, while waiting for support, many mechanical enterprises have actively found solutions to “save” themselves.

A representative of THACO AUTO said that in order to ensure production, the company actively sought more domestic and foreign raw material sources, negotiated with partners to keep prices stable. On the other hand, the modern technology platform and the all-inclusive value chain from research and product development to production and supply are an important basis for the company to improve product quality, reduce costs, and create competitive advantage.

Besides, the company has many advantages in forwarding – transportation when located near major ports such as Da Nang port, Chu Lai port, Dung Quat port, which are convenient for import and export.

For smaller businesses, SamJin LND Vina Co., Ltd (Vinh Phuc) specializing in the production of phone charging cases, computer charging cases, and electronic components has also actively adjusted and rearranged human resources, production and business plans, thereby maintaining stable production, even planning to open more production factories, invest in modern equipment and machinery, and recruit more workers.

But according to the “warning” of the Vietnam Association of Mechanical Enterprises (VAMI), many domestic mechanical enterprises are caught in the “growth trap”, which is expansion but lack of depth, putting all their efforts towards increasing revenue, meet the requirements of the unstable market, with low-value products, slow capital turnover, and by the time of settlement, capital is recovered, correct and sufficient accounting is not profitable or unable to maintain a rate of return commensurate with capital for production and business.

This is an extremely risky issue and with just a small fluctuation from the market, from a business partner or within an enterprise, production and business activities can be halted immediately.

According to Dao Phan Long, Chairman of VAMI, in order to promote the internal resources of mechanical enterprises, the State needs to have an incentive mechanism so that these units can continue to participate in big projects to accumulate enough capacity to compete with foreign industrial groups in Vietnam as well as reach out to the regional market.

Moreover, it is necessary to support Vietnamese enterprises to connect to the global supply chain, improve production and business capacity. In the future, the mechanical industry requires the development of materials, molds, processing and manufacturing, not only machining and cutting, so businesses are forced to link and go deep into the global value chain.

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