Introduction
In the Japanese manufacturing industry, restructuring the global supply chain is a pressing issue. Particularly from the perspectives of enhancing cost competitiveness and diversifying procurement risks (the “China Plus One” strategy), Vietnam is rapidly gaining prominence as a sourcing destination for aluminum die-cast parts. However, for procurement and purchasing managers, the question “The cost benefits are appealing, but do the quality and delivery (QCD) truly meet Japan’s demanding standards?” likely remains.
This article focuses on Vietnam’s aluminum die-casting industry to uncover its “true state.” We will go beyond simple cost comparisons to thoroughly explain the standards of “production equipment” and “quality control systems”—the keys to successful procurement—and where they stand today. Based on the latest market data and industry trends, we will provide a detailed analysis of the merits and potential risks of sourcing from Vietnam from the three aspects of “QCD.”
Why is Vietnam now gaining attention as a die-casting procurement destination?
There are several clear reasons behind Vietnam’s transformation from a mere “low-cost production base” to a “partner providing stable quality.”
Stable Economic Growth and a Top Candidate for “China Plus One”
Against a backdrop of political stability, Vietnam is a rare economic zone globally that maintained positive growth even in 2020 and 2021 amid the COVID-19 pandemic. According to Vietnam’s General Statistics Office (GSO), the real GDP growth rate in 2023 was recorded at **5.05%**, and a high growth rate of **6.0% to 6.5%** is projected for 2024 (World Bank forecast) [1].
For Japanese companies seeking to reduce the risk of dependence on a specific country, Vietnam, being geographically close and continuing its economic growth, has become the top candidate for their “China Plus One” strategy.
Clustering of Automotive/Motorcycle Industries and Technological Advancement
The growth of Vietnam’s die-casting industry is closely linked to the development of its domestic motorcycle and automotive industries. Vietnam is the world’s fourth-largest motorcycle market (approx. **2.5 million** new units sold in 2023) [2], and Japanese companies like Honda and Yamaha established production bases here early on.
In recent years, the automotive industry, represented by local giant VinFast, has also been developing rapidly, increasing domestic demand for high-quality die-cast parts. This demand is driving technological improvements and capital investment not only by foreign-affiliated companies but also by local Vietnamese suppliers.
Abundant Labor Force and Cost Competitiveness
Vietnam’s total population has reached approximately **100 million**, and its average age is about **33.7 years** (as of 2023), highlighting its charm as a very young and abundant labor force [3]. According to JETRO’s (Japan External Trade Organization) “2023 Survey on the Business Conditions of Japanese Companies in Asia and Oceania,” the average monthly basic salary for a manufacturing worker in Vietnam is **$269**, which is about **40%** of the level in China ($673) and about **60%** of that in Thailand ($452) [4].
This labor cost advantage continues to provide significant cost benefits in industries like aluminum die-casting, which require manual labor in post-processing (deburring, machining, inspection).
[Q: Quality] Quality Management Systems in Vietnamese Die-Casting Factories
What is the real situation regarding “Quality,” the biggest concern for procurement managers? In conclusion, the era of “you get what you pay for” (cheap is bad) is ending, but the current reality is that there is a very large disparity between companies.
Generalization of International Certification (ISO/IATF) Acquisition
The first indicator is international quality certification. Currently, many of the major die-casting factories in Vietnam that aim to do business with, or are already supplying to, Japanese companies have obtained **ISO 9001**, the international standard for quality management systems. This can be considered “standard equipment.”
Even more important is **IATF 16949**, a stricter quality standard for the automotive industry. Ambitious factories aiming to supply automotive parts or high-precision industrial components are also proceeding to obtain IATF 16949. This certification requires not just product inspection but also continuous improvement of the entire manufacturing process and prevention of defects, serving as a barometer for the factory’s overall quality consciousness.
Inspection Equipment Supporting Quality (CMMs, X-ray Inspection Machines, etc.)
To meet the micron-level dimensional tolerances (1μm = 0.001mm) and internal casting porosity management required by Japanese buyers, the availability of comprehensive inspection equipment is essential.
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Coordinate Measuring Machines (CMM): To accurately measure the dimensions of complex die-cast products, an increasing number of factories are introducing high-precision CMMs from manufacturers like Carl Zeiss (Germany) and Mitutoyo (Japan).
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X-ray CT Scanners / X-ray NDT Machines: X-ray inspection machines, which visualize internal porosity and melt flow status without destroying the product, are essential for the quality assurance of automotive safety components (e.g., brake parts, steering components) in particular.
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Spectrometers / Spectro-analyzers: These are used to strictly manage whether the composition of the aluminum alloy used (e.g., ADC12, A380) conforms to standards, both at the time of material reception and during the melting process.
Whether a factory possesses this advanced inspection equipment—and, crucially, has the “personnel” to operate and manage it properly—is a critical checkpoint for assessing quality.
Challenge: Disparities in “Quality Consciousness” and Management Methods Between Companies
Even if the equipment is in place, final quality depends on “people.” A common challenge in Vietnamese manufacturing sites is the thorough instilment of “quality consciousness” at the worker level. In some local factories, management methods that are considered “standard practice” in Japanese manufacturing—such as the thorough implementation of 5S (Sort, Set in order, Shine, Standardize, Sustain), standardization of work based on QC process charts, and ensuring traceability when defects occur—have not yet fully taken root.
[C: Cost] The Cost Merits and Pitfalls of Sourcing from Vietnam
“Cost” is likely the biggest motivator for considering procurement from Vietnam. However, it is necessary to calmly analyze its components and future trends.
The Labor Cost Advantage and Its Changes
As mentioned earlier, labor costs remain a significant advantage compared to China and Thailand. However, this advantage is not permanent. The Vietnamese government is raising the minimum wage by an average of **6%** from July 1, 2024, and labor costs are on an upward trend year after year [5].
Key Data: Business Conditions of Japanese Companies in Vietnam (2023)– 2023 Wage Increase Rate (Manufacturing): **5.5%** (Actual)- 2024 Wage Increase Rate (Manufacturing): **5.4%** (Forecast)- Advantage of Investment Environment: “Low labor costs” (**50.7%** of companies responded)- Risk of Investment Environment: “Rising labor costs” (**59.8%** of companies responded)- Procurement Challenges: “Quality” (49.2%), “Delivery time” (27.9%) Source: JETRO “2023 Survey on the Business Conditions of Japanese Companies in Asia and Oceania”
As the data above shows, while many Japanese companies feel “low labor costs” are an advantage, they also perceive “rising labor costs” as the greatest risk. This suggests that procurement based solely on low labor costs may lose its competitiveness in a few years. It is crucial to determine whether a factory is working on “improving productivity” (through automation or process improvements) to absorb these rising labor costs.
Raw Material (Aluminum Ingot) Procurement
**50% to 70%** of the cost of aluminum die-casting is accounted for by the raw material, aluminum ingot. The price of aluminum ingot is linked to the international market price on the LME (London Metal Exchange), so the material price itself does not change significantly whether procured in Vietnam or Japan.
However, Japan and Vietnam have concluded multiple Economic Partnership Agreements (EPAs) and Free Trade Agreements (FTAs). By utilizing these agreements, it may be possible to reduce or eliminate tariffs on the export of raw materials (such as special aluminum alloys) from Japan to Vietnam and the import of products manufactured in Vietnam back to Japan.
Capability Seen from a Total Cost (Logistics & Management) Perspective
When evaluating procurement costs, it is necessary to judge based on “total cost,” not just the part unit price. Vietnam is geographically close to Japan, and the lead time for ocean container transport from major ports (Haiphong, Ho Chi Minh) is only about **10 days to 2 weeks**.
However, if the local quality management system is inadequate, one must also consider the risk that the total cost will end up being higher due to the costs of dispatching quality supervisors from Japan or the costs of rework (management costs) caused by poor local communication.
[D: Delivery] Delivery Time Stability as Seen from Production Equipment
Achieving stable “Delivery” requires the factory’s production capacity and a flexible production system.
Advancing Introduction of Modern Die-Casting Machines and Automation
The equipment level of die-casting factories in Vietnam is polarized, but Japanese-affiliated, foreign-invested, and export-oriented local factories are increasingly introducing state-of-the-art equipment.
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Die-Casting Machines: In addition to conventional small machines (125t-350t class), more factories are installing large die-casting machines in the **800t**, **1,650t**, and even **2,500t** class to handle large automotive parts (e.g., transmission cases, engine blocks).
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Automation Solutions: Lines that automate the process from automatic ladling of molten aluminum from the furnace, spraying (die-release agent), and product removal using industrial robots are becoming widespread. This contributes to stable **24-hour** operation and uniform quality (leading to stable delivery) by reducing human error.
CNC Machining and Post-Processing (Secondary Processing) Capabilities
Die-casting does not end with “just casting.” After casting, the product goes through post-processing, such as precision cutting with CNC machining centers (numerically controlled machine tools), deburring, and surface treatment (e.g., chemical conversion coating, painting), to become a finished product.
A factory’s “true capability” is evident in its post-processing capacity. Factories that possess dozens of CNC machines and have a system for performing everything from casting to processing and Assy (assembly) in-house (one-stop) can reduce transportation and waiting times between processes, contributing to both shorter delivery times and cost reduction.
Logistics Infrastructure and Lead Time Reality
Vietnam’s major industrial parks are located with good access to international ports and airports. The road network is also being improved, reducing the risk of domestic logistics delays.
However, a key point to note is that Vietnam has a long holiday called Tet (Lunar New Year), which lasts about **1 to 10 days**. Before and after this period, factories shut down and logistics become congested. It is essential to factor in this Tet holiday when planning the annual production and delivery schedule.
Keys to Selecting a Partner for Successful Procurement in Vietnam
Vietnamese die-casting factories are a “mix of good and bad” (hit-or-miss) in terms of both equipment and quality. To select an optimal partner with a good balance of QCD, please be sure to check the following three points.
Look Beyond New/Old Equipment to “Management Know-How”
While it is important that a factory has installed the latest die-casting machines or expensive inspection equipment, that alone is not enough. The most important thing is the “management know-how” of “how efficiently that equipment is operated and how quality is maintained.” When inspecting a factory, it is necessary to dig deep and check the machine utilization rates, the state of die management (maintenance records), the thoroughness of 5S on the shop floor, and the specific flow for handling defects (such as Why-Why analysis).
The Importance of Japanese Language Support and Communication
It is no exaggeration to say that “quality is proportional to the quantity and quality of communication.” It is necessary to accurately convey subtle nuances regarding complex drawing requirements, design changes, or when quality problems occur. Factories that have a system for direct communication in Japanese (or via Japanese staff) not only with management but also with on-site quality control and technical staff are much faster at resolving problems.
Confirmation of “Die” Design, Production, and Maintenance Systems
It is said that **80%** of die-casting quality is determined by the die (mold). Does the factory design and produce its dies in-house, or does it partner with reliable die manufacturers? Even more important is the maintenance system for dies during mass production. If a factory lacks the ability to perform the necessary periodic maintenance every few tens of thousands of shots (injection cycles) or to respond quickly to sudden repairs, it cannot maintain stable quality and delivery.
Conclusion
Vietnam’s aluminum die-casting industry has clearly shed its former “cheap is bad” image and is evolving into a sourcing destination with a good balance of QCD, capable of supplying high-quality automotive and precision equipment parts. This evolution is supported by an abundant labor force and cost merits, as well as active investment in the latest equipment and improvements in quality management systems.
However, it is also a fact that not all factories meet Japan’s demanding standards, and the disparity between companies is large. What is required of procurement and purchasing managers is the insight to look beyond superficial costs and equipment specifications to discern the “management know-how,” “quality consciousness,” and “communication systems” that a factory possesses.
We hope that the checkpoints for “production equipment” and “quality control systems” explained in this article will serve as an aid in finding a reliable partner in Vietnam that can truly meet your company’s requirements.