HỘI THẢO QUỐC TẾ: PHÁT TRIỂN DOANH NGHIỆP NHỎ VÀ VỪA CỦA VIỆT NAM TRONG BỐI CẢNH CUỘC CÁCH MẠNG CÔNG NGHIỆP 4.0 THE READINESS OF VIETNAM’S ENTERPRISES FOR PARTICIPATION IN THE FOURTH INDUSTRISAL REVOLUTION Dang Thu Thuy and Nguyen Thu Trang, Vietnam Academy of Social Sciences, Institute for Indian and Southwest Asian Studies Abstract: The Fourth Industrial Revolution (IR4.0) has been taking place more and more strongly in many countries around the world based on the link between the real world and the digital space that is fundamentally changing the world's manufacturing base Although Vietnam does not belong to the Leading Group, which is strongly influenced by IR4.0, Vietnam will certainly not be outside the spiral of IR4.0 (WEF, 2018) By using the method of analyzing secondary documents from national statistical offices of Vietnam and the United Nations along with consulting with experts, the paper will examine the overall perspective of readniness to access to IR 4.0 in Vietnam Aimed at assessing the level of readiness of enterprieses in Vietnam, this paper applied the method developed by the German Mechanical Engineering Industry Association (Verband Deutscher Maschinen- und Anlagenbau - VDMA) This assessment method is based on pillars and 18 dimensions described for enterprises to self-assess readiness levels in IR 4.0 Key words: Industrial revolution 4.0, readiness, Vietnam enterprizes ĐÁNH GIÁ VỀ MỨC ĐỘ SẴN SÀNG THAM GIA CUỘC CÁCH MẠNG CÔNG NGHIỆP LẦN THỨ TƢ CỦA CÁC DOANH NGHIỆP VIỆT NAM Tóm tắt: Cuộc cách mạng cơng nghiệp 4.0 (CMCN 4.0) diễn ngày mạnh mẽ nhiều quốc gia giới dựa kết nối giới thực không gian số làm thay đổi sản xuất giới Mặc dù khơng nằm nhóm Dẫn đầu3 chịu ảnh hưởng mạnh mẽ CMCN 4.0 Việt Nam chẵn c ng khơng nằm ngồi vịng xoáy CMCN 4.0 (WEF, 2018) Bằng phương pháp nghiên cứu phân tích tài liệu thứ cấp từ quan thống kê thức Việt Nam Liên hợp quốc, tham khảo ý kiến chuyên gia, viết xem xét góc độ Theo Báo cáo Sẵn sàng cho sản xuất tương lai năm 2018 WEF cho thấy mức độ sẵn sàng ứng dụng CMCN 4.0 có nhóm: dẫn đầu, nhóm tiềm cao, nhóm di sản nhóm sơ khởi 47 INTERNATIONAL CONFERENCE: DEVELOPMENT OF SMALL AND MEDIUM ENTERPRISES IN VIETNAM IN THE CONTEXT OF INDUSTRIAL REVOLUTION 4.0 tổng thể sẵn sàng tiếp cận CMCN 4.0 Việt Nam Việc đánh giá mức độ sẵn sàng tiếp cận CMCN 4.0 doanh nghiệp (DN) Việt Nam dựa khung phân tích Hiệp hội Kỹ thuật kh Đức nghiên cứu - Verband Deutscher Maschinen-und Anlagenbau (VDMA) Phương pháp đánh giá dựa trụ cột 18 chiều để doanh nghiệp tự đánh giá mức độ sẵn sàng vào CMCN 4.0 Từ khóa: Cuộc cách mạng công nghiệp 4.0, mức độ sẵn sàng, doanh nghiệp Việt Nam Introduction The term IR4.0 has just appeared in the modern economy due to its breakthrough and high-tech applicability The reality shows that IR 4.0 gradually redraws the economic map of the world featured by the decline of power of countries because of resource exploitation and the increase of power of countries because of technology and innovation Along with acceleration of the digital revolution, the link between the real world and the digital space known as the Fourth Industrial Revolution (IR4.0) has connected manufacturing with information technology to create products with high added value and is expected to bring about tremendous economic benefits In Vietnam, despite recognizing the great opportunity of IR 4.0 to transform the economy to a higher level of development, the Government and enterprises have not built specific strategies and plans to remove "bottlenecks" in terms of institutions, technology infrastructure, and human resources yet The objective of the paper is aiming at presenting the readiness of enterprise‗s to the four industrial revolution, identifying factors related to IR4.0 readiness levels of enterprises , pointing out the barriers which may possibly threaten enterprises in the effective achievement of a higher technological level Industry 4.0 concept blurs the difference between human and machine work While Industry 3.0 focuses on the automation of machinery, equipment and separate processes, Industry 4.0 is expected to concentrate on the connection between the physical world and cyber space With three main features: high-speed internet, high-performance computing, sensors, cyber space is creating more value in economies This is the most fundamental feature of IR4.0 for carrying out the order, production, implementation and delivery of the product without human participation at any time during the process If industrial companies desire to catch the trend, they need to invest in terms of modern technologies and management models Vietnam in the context of IR 4.0 In the Readiness for the Future of Production Report 2018 by the World Economic Forum (WEF, World Economic Forum, Report 2018), Vietnam ranks 48th out of 100 countries in the Structure of production (behind ASEAN countries) and 53/100 countries in Drivers of production is due to the indicators of Technology and Innovation (90th), Sustainable resources (97th), Human capital (70th) and Institutional framework (53rd) (Ministry of Planning and Investment, 2019) In Southeast Asia, we only rank behind Malaysia (ranked 23/100 in technology and innovation and 21/100 in human resources), Thailand (respectively 41/100 and 53/100) 48 HỘI THẢO QUỐC TẾ: PHÁT TRIỂN DOANH NGHIỆP NHỎ VÀ VỪA CỦA VIỆT NAM TRONG BỐI CẢNH CUỘC CÁCH MẠNG CÔNG NGHIỆP 4.0 Figure 1: Assessment of competitiveness 4.0 of ASEAN countries Source: World Economic Forum (2018) Regarding production potential, the WEF assessment shows that Vietnam's 4.0 technology readiness is classified into the ―Nascent‖ (four groups which are the leading group, the high-potential group, the legacy group and the nascent group) because Vietnam is among the countries with a simple structure of production and unfavorable Drivers of production Regarding the Structure of production, Vietnam ranks 48th, behind 05 countries ASEAN4 and just standing over Cambodia (Worl Economic Forum, 2018) Regarding the Drivers of production, Vietnam ranks 53th, behind 03 countries which are Singapore (2nd), Malaysia (22nd), Thailand (35th) (Worl Economic Forum, 2018) Among the component indicators of innovation capacity, the indicators with a low performance include R&D spending in GDP (84/100), the number of scientific and engineerig publications (74/100) These are the issues that are considered Vietnam‘s shortcomings in a number of assessments such as the Global Innovation Index of the World Intellectual Property Organization (WIPO) Table 1: Comparison of Vietnam's innovation composition indexes period 2015-2018 2015 (Ranking in 141 countries and territories) 2016 2017 2018 (Ranking in (Ranking in (Ranking in 128 countries 127 countries 126 countries and and territories) and territories) territories) Indicators of innovation 78 79 71 65 Institution/ Organization 101 93 87 78 Human resources, research 78 74 70 66 Regarding production structure, Vietnam is behind countries: Singapore, Malaysia, Thailand, Philippines and Indonesia 49 INTERNATIONAL CONFERENCE: DEVELOPMENT OF SMALL AND MEDIUM ENTERPRISES IN VIETNAM IN THE CONTEXT OF INDUSTRIAL REVOLUTION 4.0 infrastructure 88 90 77 78 Market development level 67 64 34 33 Business development qualification 40 72 73 66 Output indicators of innovation 39 42 38 41 Technology and knowledge output 28 39 28 35 Creative output 62 52 52 46 The rate of effective innovation 11 10 16 Innovation index 52 59 47 45 Source: The Global Innovation Index (GII) in 2015, 2016, 2017 and 2018 of WIPO According to the World Intellectual Property Organization (WIPO), in 2018, Vietnam's innovation index continued to improve its position, up 02 steps, up 16 places compared to 2016, to 45 / 126 countries / economies ranked In particular, among the pillars of Vietnam in GII 2018, the pillar of ―Innovative output‖ increased by places but the pillar of ―Technology and knowledge output‖ decreased by 7places , from 28 to 35 (Table ) Assessment of the level of readiness of enterprises in vietnam’s participation in RI 4.0 The VDMA method can be summarized as follows: Overall, the model evaluates enterprises‘ level of participation in IR4.0 based on six pillars: Strategy and Organization; Smart Factory; Smart Operation; Smart Product; Data-driven Service; Employee Each pillar corresponds to 3-4 directions to assess the readiness of different businesses The six pillars and 18 dimensions (Figure 2) will give an overview of the readiness of Vietnamese enterprises according to points, percentages in Industry 4.0 Figure 2: VDMA methodology model of enterprises' readiness to participate in RI 4.0 Source: VDMA (2015) 50 HỘI THẢO QUỐC TẾ: PHÁT TRIỂN DOANH NGHIỆP NHỎ VÀ VỪA CỦA VIỆT NAM TRONG BỐI CẢNH CUỘC CÁCH MẠNG CÔNG NGHIỆP 4.0 Table 2: Availability according to the pillars of the business Readiness level (%) Readiness level Score Outsider Beginner Intermediate Experienced Expert Top Performer Pillar 0.53 85% 13% 2% 0% 0% 0% A Strategy and organization 0.14 83% 14% 2% 1% 0% 0% B Smart factory 0.35 65% 18% 14% 2% 1% 0% C Smart operations 1.47 13% 26% 56% 4% 1% 0% E Smart products 0.08 93% 4% 2% 1% 1% 0% F Data-driven services 0.43 67% 25% 3% 1% 2% 2% G Employees 1.24 11% 46% 41% 0% 1% 1% Nguồn: Bộ Công thương, 2019 Strategy and organization Table shows that the average readiness leves of Vietnam enterprises of the entire sector is 0.53 (the ―outsider‖ level) and up to 85% of enterprises are at the ―outsiders‖ of IR 4.0 According to a survey of the Ministry of Industry and Trade in 2019, in Vietnam only 13% of surveyed enterprises are at the beginning level and only 2% of enterprises are evaluated as having "basic qualifications" ( intermediate, belonging to the group integrated), a very small number of enterprises are assessed at the level of experienced and experts, no enterprises are assessed as top performer Table 3: Readiness level of companies for Industry 4.0 in Strategy and implementation Surveyed Industry Readiness Level (%) No of Score Samples Outsider Beginner Intermediate Experienced Expert Top Performer ALL SUBSECTORS BY SIZE 2659 0,53 85% 13% 2% 0% 0% 0% Large 538 0,88 61% 32% 7% 0% 0% 0% Medium and small 2121 BY OWNERSHIP 120 State-owned 0,51 91% 8% 1% 0% 0% 0% 1,44 37% 47% 16% 1% 0% 0% Non - State 1895 0,50 89% 10% 1% 0% 0% 0% Private 282 0,46 88% 11% 1% 0% 0% 0% Partnerships 0,90 60% 40% 0% 0% 0% 0% 51 INTERNATIONAL CONFERENCE: DEVELOPMENT OF SMALL AND MEDIUM ENTERPRISES IN VIETNAM IN THE CONTEXT OF INDUSTRIAL REVOLUTION 4.0 Limited liability Joint stock company with State-invested capital Joint stock company with no State-invested capital With foreigninvested capital 100% foreigninvested capital Joint venture 1170 0,47 93% 6% 1% 0% 0% 0% 62 0,95 61% 37% 2% 0% 0% 0% 376 0,63 82% 14% 4% 0% 0% 0% 644 0,60 81% 16% 3% 0% 0% 0% 603 0,60 59% 16% 2% 0% 0% 0% 41 0,65 55% 20% 5% 2% 0% 0% Source: Ministry of Industry and Trade, 2019 The percentage of non-state enterprises (with an average readiness point of 0.50 which is lower than the all sector ‗average of 0.53) stands outside IR 4.0 at a very high level - 89% The ratio of foreign-invested enterprises (with an average ready score of 0.60) is also quite high 81%, and of state-owned enterprises (with an average ready score of 1.44 much higher than the industry average) is 37% The willingness of enterprises at the basic level is very low in which state-owned enterprises account for 16% as the highest rate, whereas, private enterprises account for only 1% However, overall assessment, the readiness to participate in IR 4.0 of enterprises is still limited due to the difference in technology investment between state and private enterprises; the smaller the business is and the fewer employees it owns, the lower the readiness‘s point is; the situation of labor lacking technology skills; State budget investment in science and technology activities is still low, investment rate tends to decrease The readiness level in terms of strategy and organization of all sector is very low because 81% of enterprises not develop strategies, 95% of them not have a set of indicators to evaluate the implementation, 50% of them not have innovation activities and 44% of enterprises not invest in science and technology in the direction of Industry 4.0 (Ministry of Industry and Trade, 2019) Sectors with a higher level of strategic and organizational readiness than average are oil and gas exploitation, electronic products, food and apparel In particular, the proportion of enterprises investing in the creative processing sector is the highest, accounting for 47% of the enterprises investing over 10 billion dong, in the IT sector (up from 2% to 3%) Smart factory The Smart Factory pillar is defined as a factory equipped with automated machinery and processes, automated internal supply chains, automated plants, product development, and integrated information management systems (Lasi, 2014) A smart factory operates through using technologies such as artificial intelligence (AI), robots, analytics, big data and the internet of things (IoT) aimed at self-operation and self-adjustment inmanufacturing One of the most 52 HỘI THẢO QUỐC TẾ: PHÁT TRIỂN DOANH NGHIỆP NHỎ VÀ VỪA CỦA VIỆT NAM TRONG BỐI CẢNH CUỘC CÁCH MẠNG CÔNG NGHIỆP 4.0 basic characteristics of a smart factory is the connectivity, linking of devices, machines and systems to provide the data needed to make real-time decisions Figure 4: Business readiness in the Smart Factory pillar Source: Ministry of Industry and Trade, 2019 The readiness of enterprises in the Smart Factory pillar is basically still at a low point (Figure 4) The number of enterprises by all sector which is outside of smart factory is very high (about 65%), of which small and medium enterprises account for 72% However, the level of readiness to participate of state-owned enterprises at the basic level accounts for 50%, the highest of all sector and foreign-invested enterprises only account for nearly 20% According to the overall assessment, the factors affecting the readiness in the Smart Factory is proportional to the size of enterprise (the larger the size, the higher the level of participation) At the same time, other factors such as the rate of capital, the proportion of the labor force using a computer, earning bachelor degree or higher, the proportion of enterprise using the internet Staffs of enterprises without vocational certificates, bachelor degree tends to participate in the field at a lower level In addition, readiness level is inversely proportional to the age of the manager The application of smart factory concepts has helped manufacturing businesses operate more efficiently The smart factory will make the production system 30% faster and 25% more efficient; Manufacturing enterprises that have adopted and implemented smart factory techniques have continuously improved their efficiency (Koren, 2015) In addition, Shrouf (2014) also concluded that 82% of enterprises deploying smart factories have confirmed increasing production efficiency; 49% said that the number of defective products decreased; and 45% said that increased customer satisfaction In addition, Vietnamese IT companies are deeply involved in global value chains through global partnerships and technology transfer For example, CMC has also signed a cooperation agreement to implement smart factory solutions with Samsung SDS - a subsidiary of Samsung Group focused on IT services Viettel Media Company, a subsidiary of Viettel, is allowed to use Qualcomm patents to manufacture and sell 3G / 4G devices in a deal worth US $ 100 million This agreement is expected to help promote Vietnam's smartphone and IoT industry Smart operations 53 INTERNATIONAL CONFERENCE: DEVELOPMENT OF SMALL AND MEDIUM ENTERPRISES IN VIETNAM IN THE CONTEXT OF INDUSTRIAL REVOLUTION 4.0 The readiness point in the Smart Operations pillar as 1.47 is the highest among the pillars with 56% of businesses rated as "basic" or higher In order to improve readiness for Smart Operations activities, industrial enterprises need to meet the criteria about cloud computing services, management and operations automation It is noteworthy that the percentage of enterprises at “outsider‖ level in this pillar is quite low with 4% for other transportation vehicles The proportion of enterprises at ―intermediate‖ level is rather high (50% to more than 60%) and the number of firms in the “leaders‖ group (comprising readiness levels of “experienced‖, ―expert‖ and ―top performer‖) is the highest compared to other pillars Figure 5: Share of enterprises by readiness level in smart operations pillar by size and ownership Source: Ministry of Industry and Trade, 2019 The readiness for large-scale and state-owned enterprises is significantly higher than that of small and medium-sized enterprises and other types of ownership (Figure 5) Large enterprises with basic qualifications account for 60%, especially foreign-invested enterprises account for the highest of about 70% The difference in availability between businesses is due to the barrier to assess readiness in the Smart Operator pillar, which is the lack of automated control The main criteria of Industry 4.0 is the process of automatic production control, the production department automatically moves to the next processing stations, determines the path and sequence with production parameters for devices specialized Also affected by low system integration, external sales integration can help reduce costs and improve efficiency Table 4: Application of typical technologies of IR 4.0 in Vietnamese industrial enterprises Technology Applying Will apply Cloud computing 15,1 Connect the device to the device / product 12,4 Sensor technology 9,8 54 4,5 There are no plans to apply 65,6 6,1 4,7 68,9 64,6 Irrelevant Total 14,8 100,0 12,6 21,0 100,0 100,0 HỘI THẢO QUỐC TẾ: PHÁT TRIỂN DOANH NGHIỆP NHỎ VÀ VỪA CỦA VIỆT NAM TRONG BỐI CẢNH CUỘC CÁCH MẠNG CÔNG NGHIỆP 4.0 Mobile terminal technology 4,0 4,1 70,1 21,8 Real-time positioning technology 1,7 3,5 72,2 22,7 Identification technology by radio waves 1,3 1,9 58,7 38,1 Artificial intelligence 1,3 3D printing technology 0,9 Analysis and data management Big Data 0,5 3,0 2,7 4,0 100,0 100,0 100,0 72,8 22,9 100,0 51,4 45 100,0 14,1 81,5 100,0 Source: Nguyen Thang (2018) Readiness in using cloud computing functions and services is not a compulsory factor for starting Smart Operations, but is a factor that affects the ability of a business to elevate its readiness level from the “learners” to “leaders” group One reason for the low rates was only 15% of enterprises used cloud computing, 65% of enterprises not have a plan to apply For Artificial Intelligence (AI) and Big data, the application rate is quite low, equivalent to 1.3% and 0.5% of enterprises are applying Thanks to Big Data, AI technology is capable of transcending human limits and to automate complex tasks through processing large volumes of data However, many difficult problems for Vietnamese businesses in developing artificial intelligence such as a team of high-quality engineers need the company's resources as well as the state investment because of the required funding and resources is very big In addition, a challenge is the quality and accuracy of the data, otherwise called labeled data The percentage of enterprises using 3D printing technology is also very low (about 0.9%) due to high initial investment costs Thus, we are also changing rapidly, positively and actively in only a very few areas, the rest of the others are sluggish, even worrying, conservative There are many difficult areas, embarrassing behavior before new situations, new and non-traditional business methods, from agriculture to industry, transportation, commerce and services However, due to the relatively large initial investment, partly because of small and strong farming and farming practices, whoever they do, partly because of weak planning, lack of practicality and many other causes, the development High-tech agriculture did not go as expected Smart product The readiness point in the Smart Products pillar was lowest (0.08) of the six pillars assessed with the percentage of outsiders being 93% is the highest among the evaluation pillars This pillar has an important impact on the readiness level in terms of response to IR4.0 The level of importance is only behind the Strategy and Organization pillar accounting of 18.5% in identifying the readiness level Elements of readiness in the Smart Product pillar are expressed through the additional information technology function of the product and the level of 55 INTERNATIONAL CONFERENCE: DEVELOPMENT OF SMALL AND MEDIUM ENTERPRISES IN VIETNAM IN THE CONTEXT OF INDUSTRIAL REVOLUTION 4.0 data analysis collected during the use period One of the important requirements for smart products is to collect information about product data associated with IT Figure 7: Share of enterprises by readiness level in smart products pillar Source: Ministry of Industry and Trade In this pillar, the proportion of enterprises that stand outside the business accounts for a high percentage According to a UNDP‘s survey of 2659 enterprises in Vietnam, the proportion of enterprises that stand outside the market with smart products such as oil and gas (70%), electronics (80%), electricity-gas-steam ( eighty seven%) In general, the proportion of enterprises that are outside business in the pillar of smart products is very large with the proportion of all sector is 92%, state enterprises also account for 42%, especially small and medium enterprises account for 92% (Figure 7) The basic level of enterprises when applying smart products in manufacturing is only 3% (state sector) and 2% for foreign-invested enterprises The reason affecting the readiness level in the Smart Products pillar is due to the positive correlation between the size of the business and the product's ability to add IT features; the large size of the labor force (from 300 to 1000 employees) and the rate of investment For example, at the national level, Germany has set its goal to become a Smart Nation, actively innovating and exploiting technology to promote labor productivity and improve the quality of life A Smart Country needs smart products The action plan "High-tech strategy until 2020" identifies the "10 future projects" of Industry 4.0 through a sum of EUR 200 million to encourage the development of "smart products" based on German strengths (Kagermann, 2016) German is aware that innovative products are the factors that promote prosperity and support the quality of life Japan is the third largest economy in the world and has a variety of industries Besides, the Japanese also acknowledge the explosive era of Industry 4.0 As a result,in 2015, "Council of initiative to revolutionize robots" (RRIC) was founded with the participation of 200 enterprises to expand their work through using smart machines and products in the manufacturing, supply chain, construction and healthcare industries, boosting robot sales from USD 4.9 billion annually to USD 21 billion (DeWitA, 2015) 56 ... In particular, the proportion of enterprises investing in the creative processing sector is the highest, accounting for 47% of the enterprises investing over 10 billion dong, in the IT sector... proportional to the size of enterprise (the larger the size, the higher the level of participation) At the same time, other factors such as the rate of capital, the proportion of the labor force using a... assess the readiness of different businesses The six pillars and 18 dimensions (Figure 2) will give an overview of the readiness of Vietnamese enterprises according to points, percentages in Industry