VietNamNet Bridge – Vietnamese hardware and electronics
enterprises have witnessed their market shares narrowed gradually in recent
years. A question has been raised that if Vietnam should continue following the
development strategy which it has been pursuing for the last tens of years.
Hardware – the land of FIEs
According to Chu Tien Dung,
Director of the HCM City Informatics Association, in 2010, local hardware and
electronics enterprises got the turnover of 26 trillion dong, making up 22
percent of the total turnover of the industry.
The figure then rose to 38
trillion dong in 2011, but the city’s enterprises’ turnover only accounted for
16 percent of the total turnover of the industry.
It is not Vietnamese enterprises,
but the foreign invested enterprises (FIEs) which have brought the highest
proportions of turnover.
Manufacturing and assembling
desktop computers is the business field which gathers the highest number of
Vietnamese enterprises in comparison with other production fields. However, the
localization ratio of the products remains modest, which means that the
majority of accessories and parts needed for computers must be imported from
other countries.
It requires huge capital to make
hardware products. Meanwhile, most Vietnamese enterprises lack capital and they
have to borrow money from banks at high interest rates. In 2011, only 20
percent of Vietnamese enterprises making hardware in HCM City reported profit.
The problem is that desktop
computers now can be sold within the framework of computerization projects.
Meanwhile, individuals and households now tend to use laptops instead of
desktop computers.
The five hardware and electronics
FIEs in HCM City alone make up 27.6 percent (4066 billion dong) of the total
turnover (23,397 billion dong) created by the 103 enterprises surveyed in 2010.
The proportion then increased to
38.5 percent in 2011, or 13, 415 billion dong, triple that of 2010.
Great efforts still have not brought success
Vietnam has been going on the way
to develop a hardware and electronics industry for the last 20 years, but they
have not been successful.
In 1995, Vietnam kicked off the
development strategy with the assembling industry. Ten years later, the
assembling industry withered away with the withdrawal of Sony Vietnam, a TV,
video player assembler, form the market.
Other electronics manufacturers
also tend to import 100 percent foreign made products to sell on the domestic
market, or set up 100 percent foreign invested enterprises, instead of joint
ventures, to assemble products.
According to Nguyen Trong Duong,
Director of the Information Technology Department under the Ministry of
Information and Communication, Vietnam’s turnover from hardware products
reached 11.3 billion dollars, amounting to 82 percent of the total turnover of
the IT industry, up by 101 percent over 2010.
However, only 10 percent of the
big turnover was made by Vietnamese enterprises. Meanwhile,
electronics-telecom, mobile phone and computer – the three sectors which bring
the highest turnover in the IT industry – have been controlled by FIEs.
A question has been raised that
the development strategy Vietnam has been following for the last tens of years
is the most reasonable one?
Analysts have pointed out that
with the small market capacity, the production costs would be very high, thus
making it impossible to compete with Chinese products. Since Vietnam still does
not have any R&D (research and development) fundamentals, it would not be
able to catch up with other countries in terms of technologies and feature
designs.
The analysts believe that the
things that Vietnam should do in the immediate time are to develop supporting
industries with the Vietnamese enterprises working as satellites for FIEs, and
to make investment in R&D. Only when Vietnam gets more powerful, should its
enterprises jump into the hardware industry by teaming up with others to set up
joint ventures or via the merger and acquisition channel.
Lao Dong
Business & Investment Opportunities
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