Introduction
In the global manufacturing industry, the demand for aluminum castings is expanding year by year. From automobiles and motorcycles to home appliances and even renewable energy-related equipment, lightweight and durable aluminum parts are indispensable. According to forecasts by the International Energy Agency (IEA), the demand for aluminum parts is expected to increase by about 1.5 times over the next 10 years with the expansion of the EV market. This presents a significant growth opportunity for casting manufacturers.
Within this context, aluminum casting production in Vietnam is gaining attention. Located in the center of ASEAN, Vietnam stands out not only for its geographical advantages but also for its low labor costs. According to statistics from the International Labour Organization (ILO), the average monthly salary for manufacturing workers is about 60% of that in Thailand and about one-fifth of that in Japan [ILO, 2023]. Furthermore, Vietnam has the world’s third-largest reserves of bauxite (the raw material for aluminum), ensuring long-term stability in resource procurement.
In addition, the Vietnamese government is actively attracting foreign companies, supporting the manufacturing industry through measures such as corporate tax incentives and reductions in land use fees in export processing zones. In surveys conducted by JETRO, “cost reduction” and “use as an export base” are ranked high among the reasons for new market entry by Japanese companies.
So, why are Japanese companies particularly interested in Vietnam? The background lies in achieving a balance between “cost” and “quality.” While local companies may face challenges with precise dimensional tolerances and strict inspection systems, introducing the quality control and mold design expertise that Japanese companies excel at can realize a production system that is both low-cost and high-quality.
This article will outline the current state of aluminum casting production in Vietnam and explain, with case studies, how to achieve both cost reduction and quality assurance.
Advantages and Challenges of Producing Aluminum Castings in Vietnam
Advantages
The biggest advantage is the low labor cost. As of 2023, the average monthly salary for a manufacturing worker in Vietnam is around $300, which is about 60% of that in Thailand and about 20% of that in Japan [ILO, 2023]. In the labor-intensive casting industry, this difference directly translates into cost savings.
Next is the strength in raw material supply. Vietnam holds the world’s third-largest bauxite reserves, and in the future, stable procurement through the utilization of its own resources is expected.
Furthermore, its geographical advantage is also a major attraction. Located in the center of ASEAN, Vietnam is well-suited for transportation to the Thai and Indonesian markets, as well as to Japan and China. The recently developing port infrastructure enhances transportation efficiency.
In addition, the government’s investment incentive policies cannot be overlooked. The government supports the establishment of manufacturing bases by foreign companies through long-term corporate tax exemptions and reductions in land use fees.
Challenges
On the other hand, there are also challenges. The first is a shortage of skilled labor. The number of personnel with specialized skills in aluminum casting is limited, and the educational environment is not yet sufficient. This creates a risk of increased defect rates and equipment trouble on-site.
Second is the inconsistency in quality control. While the quality assurance systems of domestic companies are improving, they may not yet meet the standards of the Japanese automotive industry. It is common for Japanese companies to dispatch Japanese engineers to thoroughly manage inspections and molds.
Third are infrastructure constraints. While development is progressing in urban areas, unstable power supply and logistics delays remain challenges in rural industrial parks.
Finally, there are the complexities of legal regulations and customs clearance. Frequent institutional changes and cumbersome import/export procedures can lead to risks in meeting deadlines and ensuring compliance.
How to Achieve Both Cost Reduction and Quality Improvement
Technological Innovation and Modern Equipment
In contrast to conventional gravity casting and sand casting, Japanese companies are optimizing mold design using CAE analysis to improve yield rates. Furthermore, by introducing die-casting equipment and automated lines, they are achieving both labor cost reduction and stable quality simultaneously.
Japanese-Style Quality Control
Japanese-style quality control is a major differentiating factor in Vietnamese production. For example, Yamato Keikinzoku Vietnam has a case study of improving the defect rate from “5% to less than 1%,” which directly led to a reduction in delivery costs for the customer. By guaranteeing dimensional tolerances and establishing traceability for inspection data, they ensure quality equivalent to that in Japan, even overseas.
Human Resource Development and Localization
To compensate for the shortage of skilled personnel, skills transfer and local training are actively being conducted. Furthermore, by taking cultural differences into account and introducing regular meetings and evaluation systems, they are improving issues related to insufficient reporting and communication gaps.
Supply Chain Management
By promoting local procurement and securing auxiliary materials and processing jigs locally, they are shortening lead times and reducing costs. While they are shortening import/export lead times by utilizing port infrastructure, risk management is still necessary for factories in rural areas.
Success and Failure Stories in Vietnam
Success Stories
- Yamato Keikinzoku Vietnam: Achieved both high precision and low cost by designing wooden patterns in Japan and conducting mass production in Vietnam.
- A Japanese Automotive Parts Manufacturer: Reduced the defect rate from 5% to less than 1%, resulting in annual cost savings of several million yen.
- A Home Appliance Parts Manufacturer: Reduced reliance on imports, cutting procurement costs by 30%. Lead time was also shortened from 45 days to 30 days.
Failure Stories
- Dimensional Accuracy Mismatch: A discrepancy in specification understanding led to product returns, causing additional costs and delivery delays.
- Unstable Power Supply: A power outage stopped the melting process, causing quality defects and a worsening yield rate.
- Lack of Communication: A misunderstanding of specifications led to incorrect process progression. Language and cultural barriers were contributing factors.
Strengths of Yamato Keikinzoku Vietnam
Yamato Keikinzoku Vietnam is characterized not merely as an “overseas production base,” but as a hybrid casting manufacturer that combines Japanese-style quality control with cost competitiveness. Its strengths can be summarized in four main points.
Wooden Pattern Design in Japan + Mass Production System in Vietnam
First, by designing and prototyping wooden patterns and molds in Japan, high-precision design and early verification of defects become possible. On top of that, mass production is carried out at the Vietnam factory, allowing the company to secure both the reliability of the initial design phase and the cost advantage of local production. This workflow allows them to exhibit the dual strengths of “Japanese-level design, Vietnam-level cost.”
Integrated Production (Casting to Machining to Surface Treatment)
Next, the Vietnam factory has an integrated system that can handle everything from casting to machining, surface treatment, and inspection. This significantly reduces the lead time associated with transportation and outsourcing, enabling quick delivery to customers. Furthermore, by managing the entire process, including secondary processing, heat treatment, and painting, they can suppress variations between processes and stabilize the quality of the entire product.
Dimensional Accuracy Guarantee at the Vietnam Factory
A noteworthy differentiating factor from competitors is the quality assurance that includes dimensional tolerances. After agreeing on specifications with the Japanese side beforehand, they have established a system that can guarantee the dimensional accuracy of mass-produced items at the Vietnam factory. While there is a common concern that “overseas production has unstable accuracy,” Yamato Keikinzoku Vietnam has introduced high-precision measuring instruments and inspection flows, enabling them to ship products that meet the same quality standards as in Japan.
Stable Supply Based on Japanese Quality Standards
Finally, the company applies quality standards and management methods unique to Japanese companies to its Vietnam factory. Through process management based on ISO and IATF certifications, the introduction of QC circle activities, and the establishment of traceability, they maintain a globally accepted quality assurance system. This allows customers to have “the same sense of security as with domestic procurement, even for overseas production.”
Conclusion
Aluminum casting production in Vietnam is a market that holds the strengths of significant cost competitiveness and potential as an export base, while also facing challenges in quality, human resources, infrastructure, and legal regulations. The key to overcoming these is the knowledge and management methods of Japanese companies.
With the shift to electrification in the automotive industry and the expansion of EV demand, the need for lightweight aluminum castings will only increase. Vietnam has the potential to become not just a “low-cost production site,” but a crucial base supporting future supply chain strategies.
References
- JETRO “Investment Environment in Vietnam” (https://www.jetro.go.jp/world/asia/vn/invest.html)
- General Statistics Office of Vietnam (GSO) (https://www.gso.gov.vn/)
- ILO Wage Statistics (https://ilostat.ilo.org/)
- Mordor Intelligence “Vietnam Aluminum Die Casting Market”
- Marusan Foundry FAQ (https://marusank.jp/qa/)