Smart factories: Understanding the rules and rapid response to avoid being left out of the global supply chain

At a roundtable titled “From Vietnam’s factories to global partners: Investment, operations and technology strategies” organized by Informa Group in Ho Chi Minh City, speakers discussed how “smart factories” are reshaping manufacturing and how Vietnamese firms can position themselves to join global supply chains.

From traditional plants to smart factories

The discussion centered on the shift from conventional factories to smart factories, where equipment and production lines are interconnected through the Industrial Internet of Things (IIoT) using sensors on machines. Data is processed via cloud computing and big-data platforms, while a Manufacturing Execution System (MES) monitors production lines in real time and links to an Enterprise Resource Planning (ERP) system to manage end-to-end flows from materials to distribution.

Speakers also highlighted the role of artificial intelligence (AI) in this chain, describing it as both a monitoring tool and a decision-support assistant. AI can analyze production data, predict faults, and optimize operations in real time.

Automation as an “inevitable path” for global supply-chain participation

Associate Professor Dr. Lê Hoài Quốc, Chairman of the Ho Chi Minh City Automation Association, said automation is not optional for firms seeking to become suppliers to global supply chains. He argued that companies must progress from machinery automation to connecting control systems, and ultimately operate factories under AI.

Quốc cited IFR data indicating Vietnam’s robot density is currently about 20–30 robots per 10,000 workers. He contrasted this with Japan (around 420), Singapore (in the hundreds), and Korea (much higher, and described as a long-standing leader).

“From a competitiveness perspective, this is a worrying figure. However, from the investment opportunity perspective, the gap means a large growth runway,” Quoc said.

Market growth and the “China +1” relocation tailwind

Speakers pointed to relocation trends as a key driver for investment in automation. Vietnam’s industrial production is forecast to grow 8–10% annually through 2030, while domestic manufacturing FDI accounts for 60–70% of total FDI into Vietnam.

Most new manufacturing projects, according to the roundtable discussion, require automation from the start. The automation market in Vietnam is forecast to grow 8–12% annually between 2020 and 2030, described as among the region’s highest growth rates.

Quốc characterized this as a “historic opportunity,” linking it to the “China +1” trend that is shifting supply chains from China to Southeast Asia, with Vietnam identified as a top destination.

Measured results from Industry 4.0 implementations

The roundtable said Industry 4.0 benefits have been validated through implementations at Vietnamese firms, including a Samsung–Ministry of Industry and Trade collaboration to upgrade domestic production capacity involving 10 firms (five in the north and five in the south).

Examples cited by the Ho Chi Minh City Automation Association included:

• Dura-Line (Bac Ninh): smart-ness index rose from 1.7 to 2.8; defect rate fell from 12% to 0.5% (described as a more-than-95% decrease).
• Vida Technology (Thai Nguyen): after upgrading a clean room, defect rate due to foreign objects fell by 68.7%.
• VCT (Duc Binh): using IoT, the firm achieved a 30% reduction in process defects and a 50% improvement in internal logistics.

Across participating firms, the program’s results were summarized as: defect rates falling from 12% to 0.5%; more than 30% process optimization; a 50% reduction in internal logistics; and using fewer workers while maintaining the same plant output.

Investment returns and business impact

Speakers said the key financial decision factor for automation investment is the internal rate of return (IRR), cited at 20–35%. They also noted that net present value (NPV) was positive from the second year.

“This is an attractive return with low risk if implemented in stages. While labor costs rise by 5–8% annually, driving automation, the cost of automation equipment has fallen significantly compared to the past, and the combination of these forces pushes the break-even point closer to the firm,” Quoc said.

Smart factories do not need to be “perfect” on day one

Quốc said a common barrier is the belief that “building a smart factory” requires full upfront investment, which can lead to paralysis of action. He posed a practical question: whether firms need to reach smart-factory standards before product quality improves.

Lê Hoàng Lâm, Production Director at Maruei Vietnam Precision, said Japanese firms have long applied quality management methods such as the seven QC tools and continuous-improvement approaches, which supported globally high product quality even before modern digital technology support.

Maruei Vietnam, Lâm said, aims to complete a smart-factory model by 2030. However, even now it maintains a defect rate of 0.02% due to a robust quality-management system rather than the automation technology being fully in place.

The roundtable’s broader takeaway was that quality improvement can begin before a full smart-factory destination is reached. Enterprises can start by strengthening quality-management systems and production processes—foundations that, speakers said, no technology can replace.

Where and when to start

Speakers said developed economies such as Japan, Korea, and Taiwan show a consistent progression for firms entering global supply chains: automating machines, then connecting control systems to data platforms, and eventually moving toward AI-run factories.

Quốc concluded that for Vietnamese firms, the question is no longer “whether to automate” but “where and when to start.”