Amid the COVID-19 pandemic, small and medium-sized enterprises (SMEs) are accelerating campaigns to upgrade brands, transform e-commerce systems and develop new production and supply chains to ensure they remain viable as long-term businesses. One solution is to diversity their production base into the Association of Southeast Asian Nations (ASEAN) region for the manufacturing advantages it offers.
Make in Vietnam
One such company is Hong Kong-based sensor manufacturer Xintechnology Electronics (Xintec), which is planning to set up a factory in Vietnam, where it already outsources production on an original equipment manufacturer (OEM) basis [main picture].
The 2014-established firm also runs manufacturing facilities in the Guangdong-Hong Kong-Macao Greater Bay Area cities of Shenzhen and Huizhou, as well as branches in the United States, its largest market.
“The overall layout is based on market development trends,” said General Manager Billy Chan.
“Our customers are all over the world. North America alone accounts for 60% of the company’s total sales, with about 15% from Europe, 5% from Japan, 5% from ASEAN, and 5% from Mainland China. About 10% of sales are from South Africa and other countries,” he continued.
"Our factories in Shenzhen and Huizhou, as well as OEM production in Vietnam, have brought us cost advantages and a more efficient supply chain. This layout helps us avoid trade barriers, enhance international competitiveness, and respond flexibly," explained Mr Chan.
"In fact, we have always hoped to set up our own factories in Vietnam instead of relying on OEM production, and enhance our industrial advantages,” said Mr Chan. "But the impact of the COVID-19 pandemic has temporarily prevented our going there.”
Despite this, Xintec remains committed to realising the plan once the pandemic is over, and its endeavour is supported by the Hong Kong Trade Development Council (HKTDC).
Xintec, a regular exhibitor at the HKTDC Hong Kong Electronics Fair, has joined business missions organised by the HKTDC to Cambodia and Vietnam in recent years. The visits enabled the firm to communicate with local government and business leaders and further understand the business environment in Vietnam.
The company has also received assistance from the HKTDC’s T-box programme, which helps SMEs enhance business competitiveness and achieve transformation goals.
“During the pandemic last year, T-box arranged for us to participate in a virtual inspection mission to Vietnam and learn about opportunities in the electronics industry supply chain in northern Vietnam. There, I met Vietnamese transport companies, banks, industrial-zone management companies and business consultants,” he said.
“We also participated in a webinar held by T-box to exchange business experience in Vietnam with members of the Hong Kong Electronics Industry Association,” said Mr Chan.
Business tips
While Vietnam offers cost advantages and is not involved in any major trade war, Mr Chan advised that the country also presents various challenges as a manufacturing location, such as a shortage of local suppliers of raw materials and parts, as well as language and cultural differences.
“The biggest difficulty we currently encounter is the lack of local suppliers of various resources,” he shared.
"Since most foreign-owned factories in Vietnam already have large enterprises as customers, they don’t need to find more customers. Small factories, meanwhile, fall short of our quality requirements and cooperation would be relatively difficult.
"In addition, most raw materials and parts in Vietnam are still imported and Mainland China is the main source. Transportation of materials lacks efficiency and flexibility and often faces the risks of increased costs and delays in delivery."
He added that doing business in Vietnam requires hiring Vietnamese-speaking people. “If we engage translators, we must also respect cultural differences - local workers cannot work overtime,” advised Mr Chan.
T-box transformer
Mr Chan shared said that it is hard for SMEs to independently enhance competitive advantages, and T-box provides them with comprehensive support.
"T-box assists us in seeking suitable funding subsidies, which has helped upgrade the company’s software package, simplifying the work process, and improving efficiency. The HKTDC also provides various forms of assistance to meet our actual business needs," he said.
Based on the "sandbox" concept, T-box (Transformation Sandbox) helps SMEs enhance business competitiveness and achieve transformation goals in the areas of branding, e-commerce, manufacturing and supply chain solutions and new markets.
The T-box team works with SMEs to identify their goals and provide support over a three-month period, with group and individualised services including advisory services, workshops, government-funding information, market knowledge and networking opportunities. The programme is offered free of charge and is open to all companies registered in Hong Kong.
T-box has seen a strong response since its launch in April 2020, with more than 1,200 SME members at present. Over 300 free consultations by professional organisations, chambers of commerce, government agencies and representatives of consulates of various countries have been arranged.
Related links
HKTDC T-box
Xintechnology Electronics
