What is Supporting Industry? The concept and role of the supporting industry
1. What is a supporting industry?
1.1. Concept of supporting industries
The supporting industry is an industry that provides services, components, materials and spare parts for the production and assembly of complete products. As a cornerstone in the supply chain, this sector helps businesses optimize production processes, improve productivity, and focus on core operations.
Depending on the economic characteristics of each country, supporting industries can be interpreted differently. In Vietnam, this industry is mainly associated with the production of components and accessories for the assembly of consumer products. Supporting industries play an important role in promoting sustainable production development and increasing the competitiveness of enterprises.
Supporting industries of some countries in the world
The supporting industry was first mentioned in Japan, and the Ministry of Economy, Trade and Industry (METI) defines it as an industry that supplies raw materials, components and basic goods for the production and assembly of products such as automobiles, electrical and electronics.
In the United States, according to the Department of Energy, the supporting industry is understood as an industry that uses specific materials and processes to create products before they are transferred to the final application stage.
Supporting industries of some countries in the world
Supporting industries in Vietnam
In Vietnam, the concept of supporting industries emerged later than in many developed countries. This industry focuses on the production and supply of components, accessories, and spare parts for the assembly and creation of complete consumer products.
1.2. Popular supporting industries in Vietnam
1.2.1. Supporting industries in the mechanical engineering industry
The mechanical engineering industry is an important part of the supporting industry, specializing in providing solutions, raw materials and meeting the needs of the mechanical production and manufacturing process. Currently, technology in the industry in Vietnam is still simple and outdated. However, thanks to the reception of advanced technologies from Japan, South Korea and China, the mechanical engineering industry is gradually improving quality and catching up with global trends.
Typical products:
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Mechanical machining: Including CNC turning, milling, grinding, welding and surface treatment.
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Product design: Mold design services, 3D simulation to improve products.
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Maintenance and repair: Maintenance and upgrade of mechanical equipment and machinery.
1.2.2. Supporting industries in the automobile industry
The supporting industry in the automotive industry produces components and spare parts necessary for the assembly of complete vehicles such as engines, brakes, headlights, and other parts. Vietnam has made significant progress in this field, especially in the ability to produce domestic components such as mechanical, electrical cables, plastics and rubber.
Typical products:
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Automotive components: Including engines, transmissions, suspensions, and interiors.
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Automotive Assembly: The assembly lines of major brands such as Hyundai and Thaco have created a strong driving force for the industry.
1.2.3. Supporting industries in the textile, leather and footwear industries
The textile and footwear industry in Vietnam has developed strongly, with the participation of many domestic enterprises in the global supply chain. Supporting industries in this field provide raw materials, auxiliary materials and processing services, meeting production and export needs.
Typical products:
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Textile materials: Fabrics, yarns, sewing threads and supporting accessories.
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Textile processing: Designing, tailoring and finishing products.
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Printing and embroidery: Services to create patterns and logos on textile products, helping to increase brand value.
2. The role of the supporting industry
2.1. Platforms for promoting industrial production
The supporting industry is likened to a "support" for the development of industrial production. By supplying raw materials, machinery, components and spare parts, this industry helps ensure a stable production process, improve the quality of output products and enhance production efficiency.
2.2. Promote specialization in production
The supporting industry creates conditions for businesses to focus on their core expertise, such as manufacturing, assembling the final product. Linking with suppliers of raw materials and components helps businesses optimize their supply chains, reduce costs and improve production efficiency, and ensure that products meet higher quality standards.
2.3. Paving the way for integration into the global supply chain
In the global manufacturing system, supporting industries play an important role in linking businesses into international supply chains. Multinational corporations often rely on supporting industries to develop their production and trade chains. This presents a great opportunity for businesses in developing countries, helping them to participate more deeply in the global market through the provision of components, raw materials and other supporting solutions.
2.4. Attracting foreign investment capital
In the context of globalization, large economic corporations and international investors are increasingly prioritizing countries with industrial systems to support development. Easy access to high-quality components, spare parts and materials is an important factor to help reduce operating costs and improve production efficiency. This attracts many foreign investors to build factories and production facilities in areas with strong supporting industries.
In addition, businesses in the domestic supporting industry can take advantage of this investment to innovate production processes, improve designs and quickly adapt to the strict requirements of the international market without spending initial research costs.
The role of the supporting industry
2.5. Promoting enterprises to apply high technology
The supporting industry encourages enterprises to innovate and apply modern scientific and technological solutions in production. Thanks to the peculiarity of quickly adapting to market trends, this industry creates a motivation for workers to access advanced technical advances, improve skills and improve labor productivity. At the same time, businesses also have the opportunity to apply high technology to optimize processes, reduce costs and increase product quality.
2.6. Contributing to promoting the country's industrialization and modernization
The supporting industry is an important driving force in the industrialization and modernization strategy of developing countries such as Vietnam. The development of this industry not only creates more jobs for cheap labor but also improves the added value of the economy. Moreover, a strong supporting industry system will help Vietnam reduce its dependence on component imports, thereby saving costs and increasing production autonomy.
3. The current situation of the supporting industry in Vietnam
3.1. Overview of the supporting industry market in Vietnam
In Vietnam, many industries such as automobiles, motorcycles, electronics and textiles are still mainly dependent on raw materials and components imported from abroad. According to the General Statistics Office, in the first 2 months of 2022, the import turnover of raw materials, components and machinery spare parts accounted for 93.5% of the total import value.
This dependence leads to many challenges for Vietnamese businesses. For example, in the automotive industry, to complete a product, about 20,000–30,000 components are needed, but the domestic automotive support industry can only meet 287 components and component assemblies. Similarly, the mechanical engineering industry also faces great difficulties due to the lack of spare parts and modern equipment, making the final product not accurate and of high quality, leading to high production costs but low commercial value, making it difficult to compete with foreign enterprises.
However, besides the limitations, Vietnam has emerged a number of pioneering enterprises in the supporting industry. Companies such as Thaco, Hyundai Thanh Cong and VinFast have actively invested in supporting industry systems, developing modern production lines and advanced equipment. These steps not only reduce dependence on imports but also help the domestic supporting industry gradually affirm its position, opening up the prospect of integration and competition in the international market.
3.2. Opportunities for the development of supporting industries in Vietnam
The Vietnamese government has constantly implemented policies to promote the development of the supporting industry, with a particular focus on the production of input materials and improving competitiveness. Industrial development support centers continuously research and test products such as components and machinery parts, in order to meet domestic demand and expand export markets.
In addition, many decrees and preferential policies have been issued, supporting manufacturing enterprises in fields such as automotive components, electricity, electronics, textiles and footwear. This not only helps businesses reduce costs but also facilitates their participation in the global supply chain.
The synchronization of solutions and policies from the government has brought great opportunities for Vietnam to improve its raw material production capacity, reduce dependence on imports and promote the stable development of the supporting industry. Many domestic component manufacturing enterprises have succeeded in meeting domestic demand, thereby creating a strong motivation for the supporting industry to develop sustainably and reach out to the international market.
4. Conclusion
Supporting industries play an important role in promoting industrial production and improving the competitiveness of enterprises in the context of global integration. Through the information shared in the article, NEXPO wishes to bring a comprehensive perspective on the supporting industry, helping businesses orient their development strategies and make good use of opportunities from this potential field.
