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Hurdles to surmount in smart manufacturing

Released at: 08:28, 07/12/2019

Hurdles to surmount in smart manufacturing

Photo: Viet Tuan

Local enterprises are willing to move towards smart manufacturing but support from the government is necessary to do so in a proper manner.

by Nhat Minh

Vietnamese enterprises have long been keen to apply automation to increase productivity and improve product quality, according to Ms. Pham Thi Huong, Director of the Autotech Machinery JSC. And while examples of enterprises moving forward with the process are many, it’s anything but straightforward.

The Garment 10 JSC is one of a few local enterprises in the process of applying automation into their production. “As the textile and garment sector is known as the most labor-intensive, we expect automation would help cut the number of workers as well as improve workplace productivity,” said Mr. Than Duc Viet, General Director of Garment 10. “We have invested substantial amounts in applying information technology (IT) and installing modern production lines from Germany and Japan for the sewing, cutting, and folding phases over recent years. We have already invested in automation lines and big data.”

Mr. Cao Huu Hieu, Managing Director of the Vietnam National Textile and Garment Group (Vinatex), said that thanks to technological automation, Vinatex’s spinning factories have reduced employee numbers to only 60-70 per 10,000 spindles, compared to about 100 in the past. Meanwhile, spinning factories in China need only 10-15 employees per 10,000 spindles and plan to cut the number to just five.

Local light bulb manufacturer Rang Dong is also at the beginning stages of production transformation. “We are in the process of computerizing production lines but are still some way from being a smart manufacturing enterprise,” said Chairman and CEO Mr. Nguyen Doan Thang. “We have collected a lot of data but can’t fully exploit it effectively to materialize the goals of a smart manufacturing enterprise.” By 2023, it plans to rebuild its LED light factory at the Hoa Lac High-Tech Park in Hanoi with total investment of VND800 billion ($34.8 million).

Involved in a particularly energy-intensive sector, the Vietnam Cement Industry Corporation (Vicem) has quickly increased technology in its production lines in recent years. It has also focused on researching and applying many advanced technological solutions to cut energy consumption and improve product quality. “We prepared a roadmap for smart manufacturing, including a smart factory, smart management, electronic office, smart sales, and distribution systems management,” said Mr. Pham Duc Cuong, Manager of the Technology Department at Vicem. “Then, finally, we will become a digital company connecting data solutions and sharing values with all partners.”

Smart manufacturing is a connection between IT and production technology to optimize management and operations in order to meet the dynamic transformation of the market. “It is a long process but needs to begin now and smart factories are the first step,” Ms. Huong from Autotech said. 

As smart manufacturing is a relatively new concept in Vietnam, in recent years the Directorate of Standards, Metrology and Quality (STAMEQ) have begun to help three Vietnamese enterprises receive pilot guidance from experts at the Asian Productivity Organization (APO), which will identify and assess their current production situation. “To approach smart manufacturing, enterprises need to fully apply management systems and productivity improvement tools,” said Dr. Ha Minh Hiep, Deputy General Director of STAMEQ. 

The State agency has also collaborated with appropriate agencies to carry out information campaigns for Vietnamese enterprises in regard to smart manufacturing over the last two years. It also plans to help them gain access to deeper smart manufacturing, in particular expecting more than ten local enterprises to be guided by foreign experts next year. Dr. Hiep believes that Vietnam is one of the pioneering countries in Southeast Asia in the early access of smart manufacturing and smart factories, as the government and State agencies have strived to support enterprises to take on the digital transformation process.

Boosting innovation

In talking about the goals of being a smart manufacturer, Mr. Thang from Rang Dong said that synchronizing modern production lines and applying technology requires a major financial outlay so must be done step-by-step. Enterprise may face a number of risks if success falls short of expectations. “Support is needed from the government when investing in advanced production systems,” he believes. 

Having surveyed many factories in countries such as India, China, and Israel, Mr. Hieu from Vinatex said caution is crucial when investing in smart manufacturing and local textile enterprises should not attempt to do so at any cost. If modern equipment is installed but no or too few orders are placed, investment efficiency will be zero. 

Businesses around the world have invested in smart factories through different stages, especially those who receive large orders, but many Vietnamese enterprises simply can’t rely on regular orders coming their way. Meanwhile, investment in robotics is about ten-times higher - or VND1 billion ($43,000) - than for traditional technology. “Only when orders sizes are large can we invest,” Mr. Hieu said. “This is also the case at many local garment makers.”

Of a similar mind, Dr. Hoang Xuan Hiep, Rector at the Hanoi Textile and Garment Industry University, said that investment in 4.0 technology is significant, so yarn, weaving, and dyeing enterprises would need to invest over VND100 billion ($4.2 million) and garment enterprises VND50 billion ($2.1 million) over the course of a decade. “Such investment is only realistic for businesses with strong financial capacity,” he said.

Mr. Viet from Garment 10, meanwhile, emphasized his readiness to buy the most advanced and modern sewing equipment but added that such devices can only automate certain stages, with the sewing stage being the most difficult. Garment products are specific, he explained. For instance, men’s suits and shirts come in a host of styles made from a diverse range of materials. For such reasons, he acknowledged that it is difficult to build a fully-smart factory in the garment industry. Without major support from government policies, businesses will continue to struggle, even a strong company like Vinatex. The government not only needs to introduce financial policies but also pay due regard to creating a favorable environment to promote the application of 4.0 technology in the textile industry.

Mr. Thang asked whether businesses investing in 4.0 technology and energy-saving technologies would be able to use pre-tax profit or secure exemptions from corporate income tax when doing so.

According to Mr. Tran Viet Hoa, General Director of the Science and Technology Department at the Ministry of Industry and Trade (MoIT), incentive policies on corporate income taxes since 2008 have covered a fairly complete range of industries and the use of digital and high-tech applications suitable for the industrial revolution. These policies were issued in a timely manner, both at the level of the Law on Taxation and specialized laws, and in related decisions from the Prime Minister.

The most outstanding feature of corporate income tax incentives for industries and key sectors during Industry 4.0 is the preferential corporate income tax rate (10 per cent for 15 years from the first year of income generation, exemptions for four years, and 50 per cent reductions for nine subsequent years from the time taxable income is earned). Feedback from local and foreign businesses and investors, however, show there is a lack of practicality in the framework of policies and administrative procedures in Vietnam, according to Mr. Hoa. Links between ministries and agencies in implementing administrative procedures for enterprises to access incentives to adapt to Industry 4.0 remain ineffective.

In order to facilitate businesses, MoIT will continue to coordinate with the Ministry of Finance and relevant ministries and branches to resolve such difficulties, especially regarding the renovation of the current tax incentive model. Therefore, with direct support from the budget through the Science and Technology Program and the Business Support Program, the ministry expects to create successful pilot models to demonstrate effective investments and technological innovation, to assist innovation by other businesses. 

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