Automation in Vietnam Driving Economic Innovation & Industrialization

About 10% of firms' operational tasks in Vietnam have been automated in the last three years, this is expected to grow to 25% by 2023

Did you know that about 10% of firms’ operational tasks in Vietnam have been automated in the last three years, and this is projected to increase to more than 25% by the end of the year?   Setting the stage for what is surely a vibrant and promising field fueling Vietnam’s industrialization.

Products manufactured automatically through the use of robots, control systems, and other appliances that require minimal human intervention are called automatons. Automated manufacturing increases labor productivity in manufacturing industries. 

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Robot manufacturing, research, marketing, and software development are just some of the areas where automation creates new jobs with specialized skillsets. The overall rapid job displacement for low-skilled needs, caused by automation and globalization, however, still raises concerns about the social and economic impact. 

Growth of automation around the world

2021 was the year when the global industrial automation market reached USD 191.89 billion according to a report by Fortune Business Insights. In 2022, the market is forecasted to reach USD 205.86 billion, and USD 395.09 billion by 2029, at a CAGR of 9.8%.

As a result of COVID-19 however, industrial automation demand has been lower than expected across all geographies. According to Fortune Business Insights, the global market declined by 6.5% in 2020 compared to 2019.

With the penetration of 5G wireless technology into the country and more widespread adoption of industry 4.0, automation solutions are becoming increasingly popular across industries. Moreover, the expansion of digitalization, augmented reality (AR), and industrial Internet of Things (IoT) is a significant indicator of global industrial automation market growth.

Adoption of automation in Vietnam

Vietnam’s current and planned automation levels are higher than expected. According to foreign and domestic investors, 67% of businesses will automate new tasks in the next three years, while 75% will use automation for existing tasks. To reiterate, about 10% of domestic firms’ operational tasks have been automated in the last three years, and more than 25% are planned by the end of the year, as evidence of growing interest in the sector.

Why automation is growing in Vietnam 

Business owners in Vietnam are driven by a variety of motivations to invest in automation. By reducing labor recruitment and training costs, they believe they will be able to connect with overseas buyers and customers, which will aid in global integration. Among Vietnamese businesses, foreign-invested enterprises (FIEs) are the primary customers with the highest levels of current automation.

There are surprising ways in which automation affects businesses’ employment decisions. As automation increases, the impact on current employment and future hiring plans is varied.

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The automation of domestic businesses caused 12.6% of companies to increase their workforces, compared to 35% of companies that plan to maintain current employment levels and 27% of companies that plan to reduce them. More than half of this second group plans to do the same activities but with fewer participants.

Potential impact & preparedness in APAC

In recent years, information technology has made it easier to communicate and share knowledge. The current revolution – called industry 4.0 – is increasingly being characterised by automation. This can be expected to continue growing, even in developing nations in SEA.

Perhaps nowhere is this clearer than in the Asia Pacific (APAC). In some respects, APAC is leading the charge. For example, APAC is home to 64% of the world’s industrial robots. Revenue from Artificial Intelligence (AI) platforms is forecast to grow twice as fast in APAC compared to the remaining parts of the world between 2019 and 2024.

For many businesses, the automation journey is just beginning. The Know Your Customer (KYC) process is still largely conducted manually by more than two out of five banks around the world. In addition, many individuals still lack access to the internet, despite being engaged with smart technologies. 

Autodesk Foundation commissioned a study to identify the APAC labour markets that are at a high risk of technological disruption. For instance, it was found that only 17% of Pakistanis use the internet, while only one-quarter of Myanmaris do. Whereas internet adoption is increasing significantly in Vietnam.

A new quantitative measure is created that takes into account the likelihood of automation in different industries, as well as workers’ disadvantages within those industries. This report identifies those most at risk in order to identify interventions that can be scaled and adapted to different circumstances across the region.

Key learnings from the analysis done by Deloitte, is that labor markets that have leveraged automation technologies to overcome roadblocks, such as an ageing population or stagnant productivity growth, are at the forefront of overcoming issues related to a workforce shortage. Reflecting on the changing nature of work has never been more important.

Globally, COVID-19 has revolutionised ways of working by accelerating automation. The adoption of robotic process automation is expected to increase in nearly half of all businesses in the coming year. 

Implications for the Vietnamese workforce 

It is unlikely that most Vietnamese workers in the garment and footwear industries, for example, will be able to earn a living without doing menial tasks, faced with the risk of unemployment without preparation.

In surveys, researchers found that workers’ skill sets during the Fourth Industrial Revolution – when new machines and technological equipment are used – differ vastly from what workers now possess. This is especially true when it comes to requiring multi-skill sets: not just in terms of professional know-how, but also in terms of computer skills, language skills, and systematic thinking. There is a shortage of skilled workers in the garment and footwear industries, and advanced training for these skills is not a simple process.

Currently, businesses train their employees mostly on the skills they need for the present, rather than future skills. Purchasing and installing new technologies can be done immediately, and so can deciding to adopt them; however, training requires some time. Unless workers are prepared, this will be a huge challenge.

Further Challenges Expected

As far as automation risk and preparedness are concerned, Vietnam ranks seventh and eighth, respectively, according to autodesk’s report. As a result, 9% of the country’s Gross Domestic Product (GDP) is spent on Research and Development (R&D), which is lower than many of its neighboring countries, and its workers are underutilised more than any others in the region. Vietnam’s internet penetration rate is only 38%, which is less than half that of developed countries like Singapore and Australia.

Growth opportunities 

At the sixth Vietnam International Conference and Exhibition on Control and Automation (VCCA) in April 2022, the Minister of Science and Technology made public several significant announcements. The government has given top priority to 99 high-tech products, 20 of which are in the automation field. It has also supported the development of 107 high-tech products, including 30 in automation.

The automation vendors are increasingly being called upon to handle the complete lifecycle and asset management of automation and control systems as Main Automation Contractor (MAC) concepts become increasingly common in automation and control system procurement. Manufacturing sectors such as automobiles, electronics, and machinery production are expected to grow rapidly, boosting the factory automation industry as a result.

Due to the expansion of the manufacturing sector, Vietnam’s automation market is forecasted to grow steadily. The market for automation solutions is expected to be fueled by industries such as power generation, chemicals, and food & beverage. While infrastructure challenges persist, consumer demand is driving positive growth prospects for the economy.

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from 2019 to 2022 its approximated that 10% of tasks were automated within various industries in Vietnam.

Vojtech Zehnalek

Verified by:​

Vojtech Zehnalek, MSc.

Vojtech Zehnalek is the CEO of the Cekindo Vietnam office. He graduated in Economics and International Trade from the University of Economics in Prague, the Czech Republic, and he also earned a Business Degree at the Vlerick Business School in Belgium.