The mechanical industry is one of the fundamental sectors in Vietnam, playing a crucial role in economic and industrial development. Vietnam’s mechanical sector encompasses various fields, including the manufacturing of machinery and equipment for other industries such as agriculture, construction, transportation, and energy.

Overview of Mechanical Industry in Vietnam

According to statistics from the General Statistics Office (GSO), in 2023, Vietnam has approximately 30,000 mechanical enterprises, accounting for nearly 30% of the total number of manufacturing and processing enterprises, with the total revenue of the whole industry reaching over 1.7 quadrillionVND and creating jobs for more than 1.2 million labor. The domestic mechanical industry has gradually improved the localization rate, thereby driving the development of other industries and economy[1].

Source: Ministry of Industry and Trade (MOIT)

Mechanical processing is a subset of the mechanical industry that involves the fabrication and production of components, parts, or products made from metals and other materials through machining methods such as cutting, shaping, casting, forging, stamping, welding, and other mechanical treatment methods. The primary objective of the mechanical machining industry is to produce mechanical products with precise shapes, dimensions, and accuracy that meet technical specifications across various sectors, including machinery manufacturing, automotive, electronics, aerospace, and construction.

Source: Website of Intech Vietnam Mechanical., jsc

Situation of the companies operating in the Mechanical processing industry

According to statistics from B&Company’s enterprise database based on the Vietnam Standard Industrial Classification (VSIC) [2] in 2021, the total number and total revenue of companies operating in the field of mechanical processing[3] increased gradually from 2017-2021. The number of companies reached 11,998 companies (accounting for 40% of total companies in the mechanical industry), and total revenue reached  197,947 billion VND in 2021, with a compound annual growth rate (CAGR) of 15% during the 2017-2021 period.

Number of company and revenue in the field of mechanical processing, period of 2017-2021

(Unit: Billion VND)

Source: B&Company’s enterprise database

Specifically, the revenue of companies operating in mechanical processing increased sharply in the period of 2020-2021, with revenue in 2021 reaching 197,947 billion VND, 1.3 times higher than in 2020. The reason was that mechanical enterprises were not affected much by the COVID-19 pandemic, along with participation in many free trade agreements, which has promoted the production of Vietnam’s mechanical industry to grow strongly compared to 2020.

Most of the companies operating in the field of mechanical processing are concentrated in the Red River Delta region, accounting for 50% (5,979 companies) because of the following reasons:

• Firstly, the Red River Delta is a key economic region in Northern Vietnam, including the capital Hanoi and industrial provinces such as Bac Ninh, Hai Phong, Hai Duong & Vinh Phuc. This location provides businesses with easy access to regulatory agencies, customers and business partners.
• Secondly, well-developed transport infrastructure, including seaports, highways and Noi Bai International Airport, facilitates the transportation of goods, raw materials & components.
• Thirdly, the Red River Delta has an abundant of labor, with a total workforce of over 11.6 million people, accounting for 22.5% of the national workforce in 2022 (GSO), with the potential to meet the labor needs of the mechanical processing industry.

The characteristics of Vietnamese mechanical enterprises are primarily small-scale production businesses due to the industry’s requirement for significant initial capital investment, advanced manufacturing technology, and skilled labor. According to statistics from B&Company’s enterprise database, among the 11,998 enterprises operating in the field of mechanical processing 65% (7,811 companies) are small-sized companies, while 31% (3,724 companies) are micro-sized companies.

Companies operating in the mechanical processing field by region, 2021	Companies operating in the machining field by size, 2021

Source: B&Company’s enterprise database

By processing method, in general, the number of companies operating in the fields of machining, casting, forging, and stamping tended to increase over the years from 2017- 2021. In the period of 2020-2021, there was a slight decline in the number of casting, forging & stamping companies due to the impact of the COVID-19 pandemic, which forced companies to adjust their production strategies or exit the market.

Number of companies by processing method, period of 2017-2021

(Unit: companies)

Source: B&Company’s enterprise databased

Revenue of companies operating in the fields of casting, forging, stamping and cutting processing tends to increase gradually over the years 2017-2021, with the highest proportion still being the group of maching companies, reaching 167,106 billion VND in 2021. 

The revenue of companies by processing method, period of 2017-2021

(Unit: Billion VND)

Source: B&Company’s enterprise database

Examples of mechanical companies that have experience in working with Japanese partners

[1] https://vsi.gov.vn/vn/tin-cong-nghiep-ho-tro/tong-quan-thi-truong-co-khi-viet-nam-nam-2022-c5id2130.html

[2] Vietnam Standard Industrial Classification (VSIC): https://vntr.moit.gov.vn/storage/legal-documents/viet-nams-standard-industrial-classification-of-economic-activities.pdf

[3] VSIC 24310 Casting of iron and steel; VSIC 24320 Casting of non-ferrous metal; VSIC 25910 Forging, pressing, stamping and roll-forming of metal; powder metallurgy; VSIC 25920 Machining (drilling, lathe, cutting, grinding..); treatment and coating of metals

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