AsemconnectVietnam - The manufacturing industry faces a mandate to shift from mere processing and assembly toward mastering technology, increasing localization rates, and adding value within the production chain.

Processing and assembly remain a bottleneck
According to a report by the Department of Industry (Ministry of Industry and Trade), Vietnam's industrial sector has achieved notable successes in recent times. Industry plays a pivotal role in economic growth, structural transformation, and exports, gradually positioning Vietnam as a regional manufacturing hub. Intra-sectoral structures have shifted positively, with a gradual reduction in the share of resource- and labor-intensive industries and an increase in the share of processing, manufacturing, capital-intensive, and technology-intensive sectors.
Speaking at a seminar on Vietnam-Netherlands manufacturing cooperation organized by the Vietnam Trade Promotion Agency (Ministry of Industry and Trade) on August 6, 2026, Mr. Pham Van Quan, Deputy Director of the Department of Industry, noted that several key foundational industries have been established and developed. These include electronics, telecommunications, information technology, oil and gas, metallurgy, iron and steel, mechanical engineering, automobiles, motorcycles, chemicals, cement, and construction materials. Production and export capacities for many products have improved; by 2025, seven groups of processed industrial goods are projected to achieve export turnover exceeding US$15 billion.
However, leadership from the Department of Industry also highlighted limitations hindering the sector's sustainable development. The current development model remains primarily extensive in nature, with production heavily reliant on processing, assembly, low-cost labor, and imported inputs. Furthermore, localization rates remain modest due to limited mastery of core technologies. High-value-added stages—such as research and development (R&D), product design, the manufacture of specialized equipment, and brand distribution—remain largely controlled by foreign-invested enterprises (FDI). Notably, the industry's autonomy remains limited due to the slow development of supporting industries and the materials sector, leaving domestic enterprises vulnerable to shocks and fluctuations within global supply chains.
"The primary cause of these limitations is the low level of science, technology, and innovation. Most domestic enterprises are small and medium-sized, lacking long-term capital and facing constraints in management capacity and production linkages," observed Mr. Pham Van Quan.
Speaking at the same seminar, Mr. Hoang Manh Trung, a representative of the Vietnam Association of Mechanical Industry (VAMI), suggested that Vietnamese enterprises should not approach the market in isolation. Instead, they should form "competency clusters," where lead enterprises connect with satellite firms to build a robust capability profile when engaging with international corporations.
Focusing on six key solutions
From a regulatory perspective, Mr. Pham Van Quan added that Vietnam aims for the processing and manufacturing sector to contribute approximately 28% of its GDP by 2030. However, achieving this goal requires addressing numerous challenges, most notably the heavy reliance on the foreign-invested sector.
To resolve these bottlenecks, Mr. Pham Van Quan outlined the direction for restructuring Vietnam's industrial sector in the coming period, emphasizing a strategy that treats the domestic market as the foundation and the international market as the driving force. ...shifting from pure contract manufacturing to deep processing, system integration, and co-design, focusing on six solutions:
First, develop the industrial sector with the domestic market as the foundation and foreign markets as a key driving force. Developing the domestic market serves as a crucial basis for sustainable industrial growth, running parallel to the strategy of boosting exports. Prioritize industrial sectors and products with significant market potential to ensure economic efficiency in industrial production.
Second, restructure the industrial system towards integration, ensuring close linkages across all stages from input supply, materials production, and manufacturing to design, system integration, project implementation, and market connectivity. Strengthen linkages between the FDI sector and domestic enterprises to build a capable ecosystem of local suppliers, thereby gradually enhancing the industry's self-reliance.
Third, develop foundational industries by prioritizing high technology, automation, and smart manufacturing; shift from contract manufacturing and assembly to deep processing and participation in high-value-added stages such as design, materials development, manufacturing technology, and distribution. This approach aims to increase localization rates and value-added content throughout the industrial production chain.
Fourth, develop the industrial sector along green, digital, and circular lines. Promote the establishment of eco-industrial parks, smart industrial parks, and carbon-neutral production models to enhance the industry's adaptability amidst the global economic transition.
Fifth, science, technology, innovation, digital transformation, and Industry 4.0 serve as the most critical drivers of industrial development. Emphasis must be placed on investment in research and development (R&D). Innovation in manufacturing and the development of high-value products should be encouraged. Collaborative models involving enterprises, research institutes, and universities must be strengthened to foster domestic technology.
Sixth, a high-quality workforce is a decisive factor in boosting industrial productivity and quality. Engineers and highly skilled workers must be trained to meet the demands of modern industry. It is essential to cultivate a workforce capable of mastering core and strategic technologies as well as modern corporate management practices, thereby serving as the nucleus for an ecosystem of innovative industrial startups.
Source: VITIC/congthuong.vn