What is industrial production? How to calculate industrial production value
09-08-2025 269
Industrial production is an important sector in the country’s economic development. The country is witnessing a strong transformation of industrial production thanks to the application of automated production lines, helping to increase productivity, optimize costs and minimize operational errors. High-tech solutions not only improve management efficiency but also meet strict quality requirements in a globally competitive environment.
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Join us to learn in detail about what industrial production is? The value of industrial production, current status and limitations through the article below.
What is the concept of industrial production?
What is industry?
Industry is an economic sector that specializes in exploiting natural resources or processing raw materials into products for consumption and production. This is a field that plays a key role in the process of modernization and economic development of a country.
The industry includes many different fields such as: mining industry, processing - manufacturing, energy industry, light industry, heavy industry, ...
What is industrial production?
Industrial production is the process of applying modern machinery, equipment and technology to create large-scale commodity products, uniform standards and high efficiency. Unlike traditional handicraft production, industrial production emphasizes specialization, automation and chainization in every stage - from input materials to finished products.
Industrial production is often applied in factories, industrial parks and has the ability to expand scale according to market demand. This is an important foundation to help businesses optimize costs, increase productivity and enhance competitiveness in the context of global integration.
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Types of industrial production value
Industrial production value represents the total value created from the production of goods and services in the industrial sector in a specific period of time. This is an important economic indicator, not only reflecting production capacity but also a measure contributing to assessing the level of industrial development of each locality and the whole country. In addition, industrial production value is also used to monitor the industrialization and modernization process of the economy.
In the calculation of this indicator, the price factor plays a key role and is classified based on the following pricing methods:
- Basic price: The amount that the producer actually receives after selling the goods or services, excluding product taxes but taking into account product subsidies (if any). This price does not include transportation costs and sales charges borne by third parties.
- Producer price: The price that the producer receives when selling the product or service, after deducting deductible taxes such as VAT. Similar to the basic price, the producer price does not include transportation costs or trade costs not paid by the producer.
Final user price: The total amount that the buyer actually pays to receive the product or service at the desired time and place. This price includes transportation costs paid by the buyer, but does not include deductible VAT.
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How to calculate industrial production value
Industrial production value is an economic indicator that represents the total monetary value of all material production results created by industrial enterprises in a certain period (usually by year). This is an important basis for assessing the scale, production capacity and operational efficiency of industrial establishments.
Principles for determining industrial production value
When calculating this indicator, it is necessary to comply with a number of important principles to ensure accuracy and avoid duplication:
- Applying the factory method: Only calculate at the final independent economic accounting unit of the enterprise.
- Calculating once only: The value is only recorded once at the final production stage, not accumulated many times in the internal production chain.
- Excluding commercial goods: Items bought and sold without processing, manufacturing or production intervention will not be counted in this indicator.
Method of calculating industrial production value
This indicator is often denoted as GO (Gross Output) and is calculated based on the sum of the constituent elements as follows:
GO: Element 1 + Element 2 + Element 3 + Element 4 + Element 5
In which:
Element 1 - Finished products
Including products manufactured from raw materials of the enterprise or processed from external raw materials but have completed the entire production process, meeting technical requirements for storage or sale. For industries such as electricity, water, ice production, ..., the value of finished products is determined according to actual consumption output.
Factor 2 – Value of industrial services provided to outside parties
Including processing, repair or manufacturing work on demand for external partners, of a technical-industrial nature, such as turning, milling, welding, assembly, manufacturing spare parts, etc.
Factor 3 – Value recovered from non-genuine products and by-products
- By-products: Are products that arise simultaneously during the process of creating the main product.
- Secondary products: Products that do not meet standards and cannot be put into the finished product warehouse.
- Scrap: Products that are completely damaged and cannot be used.
- Scrap: Materials and raw materials remaining or recovered during the production process.
Factor 4 – Value from leasing production assets
Including revenue from leasing machinery, equipment or infrastructure in the production line that the enterprise is managing to outside parties.
Factor 5 – Difference in value of unfinished products and semi-finished products between the beginning and end of the period
Reflects the change in the amount of unfinished products, products in the production process or semi-finished products not yet released from the warehouse during the accounting period.
Notes when calculating industrial production value
Calculating industrial production value must ensure:
- Accurately calculate the nature of production activities: Only reflect the value created by the enterprise itself, not including the value of unprocessed purchases.
- Avoid duplication: Between departments within the same enterprise or between continuous production stages.
- Ensure consistency in time: Input and output factors must be determined in the same calculation period to accurately reflect production efficiency.
Current status of industrial production
In the 2011–2020 strategic period, the industrial sector has demonstrated its role as one of the main growth drivers of the Vietnamese economy. With the highest growth rate among economic sectors, industry has contributed about 30% to the national GDP, while rising to play a key role in export turnover. This achievement has helped Vietnam advance rapidly on the global trade map, from 50th place in 2010 to 22nd place among the world's leading exporting countries in 2019.
Along with the strong development, many pillar industries have been clearly defined, such as: oil and gas, metallurgy, electronics - telecommunications technology, information technology, mechanical engineering, construction materials, textiles and footwear. In particular, the processing and manufacturing industry is playing an increasingly prominent role, reflected in the increase in its contribution to GDP from 13% (in 2010) to nearly 17% (in 2020).
In terms of internal industry structure, a positive shift has been recorded. The proportion of the mining industry in GDP has continuously decreased, from 9.1% in 2010 to 5.55% in 2020, while the processing and manufacturing industry has a sustainable growth trend. This shows a clear shift from resource exploitation to production with higher added value.
In addition, the wave of foreign direct investment (FDI) has made an important contribution to industrial development. Many multinational corporations have chosen Vietnam as a strategic destination. By the end of 2018, the country recorded more than 27,300 valid FDI projects, with a total registered capital of about 340 billion USD. Of which, the accumulated realized capital reached nearly 191.4 billion USD, contributing to promoting the economic restructuring towards modern industry.
Limitations and challenges in industrial production
Despite many remarkable achievements, the industrial production sector still faces many existing problems:
- Unsustainable growth: The growth rate of the industrial sector has not yet fully met the requirements of the national industrialization and modernization process.
- Low technology level: Most enterprises use outdated equipment and technology, leading to low efficiency.
- Limited competitiveness: Compared to countries in the region such as Thailand, Malaysia or Korea, the competitiveness of Vietnam's industry still has many weaknesses.
- Low labor productivity: Labor productivity in the industrial sector is not high, creating a large gap compared to developed countries.
- Supporting industry has not developed synchronously: Industries supplying components, raw materials, and production support have not received due attention, causing domestic enterprises to depend heavily on imported sources.
Industrial production plays an increasingly important role in economic development, especially when enterprises apply automation lines to increase productivity and reduce operating costs. At Intech Group, we provide precision mechanical solutions, automation, technology, energy and modern automation lines, suitable for diverse needs from large factories to small and medium-sized units. With practical experience and a team of specialized engineers, Intech is ready to accompany enterprises on the journey of optimizing production. If you are looking for a solution to improve your production line, do not hesitate to contact us via hotline 0966 966 032 for dedicated advice and support.
