Vietnam manufacturing value chain transition

Vietnamese manufacturing sectors, including mechanical engineering and wood products, are attempting to transition from Original Equipment Manufacturing (OEM) to Original Design Manufacturing (ODM) to capture higher value within global supply chains.

In the mechanical engineering sector, particularly in Phu Tho province, domestic firms face difficulties supplying foreign direct investment (FDI) blocks due to small scale, high capital costs, and limited Research and Development (R&D) capacity. While the province hosts significant FDI capital from corporations such as Honda, Toyota, Piaggio, Compal, BYD, and Meiko, local enterprises often remain limited to simple processing tasks. Challenges such as land lease issues, logistics, and underutilized machinery further impact investment efficiency.

Similarly, the wood and furniture industry has experienced massive export growth, reaching approximately $17.2 billion by 2025. However, most businesses still lack control over design and branding. To increase value retention, the industry is looking toward investing in design, sustainable production, and AI technologies.

Recent developments show enterprises increasingly focusing on building technology-driven national brands. For example, Vietnipa is exporting organic coconut products to the US by meeting international standards, and beauty brands like Cocoon are leveraging local ingredients to establish unique identities. To support this transition, experts emphasize the need for stable, long-term capital and improved credit access for SMEs. Business leaders, including TH Group founder Thai Huong, advocate for mastering AI, ESG standards, and circular economy models to ensure Vietnamese brands can compete globally.