Vietnam - Electronics short circuits

A challenging economy has pushed Vietnam’s electronic industry to its first market decline since 2008.  How will the market perform in 2013 and what should electronic retailers and producers do to deal with the situation?

Pessimistic forecasts prevailed for the electronic and IT products industry market this year at a conference help by Nhip cau Dau tu newspaper. The title of the conference theme: “Cooperate together in stimulating consumer demand by the end of 2012.”

“It is the first time the industry has experienced its negative growth rate for five years and there will no recovery sign by the second half of 2013,” said Huynh Phuoc Cuong, GFK Vietnam’s electronic and IT products division manager.

According to the results of the latest survey conducted by GFK Vietnam - GFK Market Insight October 2012, the average of sale units in the consumer electronics market dropped by 8.8 per cent while the average of value declined by 4.9 per cent year on year.

Only several home appliances including air conditioner and washing machines enjoyed positive growth rates whereas other electronic and IT products such as CRT TV, Plasma TV, camcorder, digital cameras, mobile computers and even smart-phones endured declines of sales, revenues and prices quarter on quarter.

Cuong thought that the downturn was mainly caused by the impact of the global economic crisis since 2008.

“The market is booming in 2008-2009 with a series of previous orders from foreign countries. However, after the global economic crisis, an amount of orders were canceled in 2009-2010. And this year we cannot export as well as previous years. Hence, total sale units and revenues sharply dropped,” said Cuong.

Steven H.L.Goh, chairman of Retail Asia Publishing, agreed with Cuong that impacts of the global crisis slowly came to Vietnam and this year the country was totally affected.

“At the time the burst of the 2008 global crisis, foreign investors came to other emerging markets like Vietnam and caused the bubbles in the stock and property markets of the nation. The recent deflation of the bubbles led the present dull of the nation’s economy and also hit the consumers’ confidence. As a result, the retail market, in which is the electronic market, is slowing down,” said Goh.

Goh believed that the market would recover if foreign investors come back. “We might see in 2014 but not 2013,” added Goh.

Nguyen Nu Tuyet Hong, director of client service quantitative of Nielsen Vietnam, also said that Vietnam’s consumer confidence index dipped 8 points to 87 in this third quarter, marking the lowest confidence since the first quarter of 2009. Around 73 per cent of Vietnamese stated this was not a good time to buy things they wanted and needed, and their cautious sentiments were predicted to increase more next year.

Nguyen Huy Vu, a representative from Nguyen Kim, one of the largest electronics and home appliance retailers in Vietnam said: “We thoroughly understand the challenges. However, it is not a time for waiting a miracle that the market would be recovered by itself. We call for cooperation of partners in stimulating customer demand to save the market and save all of us, too.” Vu said that Nguyen Kim would like to offer best prices and services to lure customers but it faced difficulties as it did not manufacture products.

“We sell washing machines but we cannot offer washing powders for them. We sell TV but we cannot decide the length of warranty. We sell mobile phones but we cannot discount their mobile fees. We lack a lot of thing,” Vu said. “That is the reason why we call for the cooperation of producers, service suppliers, and consultants to create a comprehensive sale policy that attract customers and benefit us.”

Hong from Nielsen Vietnam said that trying to offer low prices was good but it was not enough to lure customers.

“With the hard period of the economy, customers did their tightening monetary policies. Many of them tend to buy products with low prices but there is the same number of customers willing to pay at high prices so as to own premium products which are innovative, modern, have more value added initiatives and have good after-sale services,” said Hong.

“The evidence is that new generations of smart-phones, LED TVs, tablets and Ultrabook series with touch screen are hunted by customers and promises a healthy growth,” added Hong.

Representatives from Sony Vietnam, Samsung Vietnam and Intel Vietnam also agreed that customers currently are not easily satisfied with the normal products. They always request higher technology added in their goods and willing to order overseas to own new products of famous brands.

Mai Sean Cang, general director of Intel Vietnam, said that in the fierce competition among technology producers, it only tried its best to continuously launch new products with better quality, design and prices and ensure a good delivery to customers.

Hong emphasised that in the current climate, consumers and shoppers were more careful in their stores, brands and format choices with new lenses. Hence, retailers and producers should show them what their competitive features are and choose right advertisements.

“About 92 per cent of Vietnamese consumers are more likely to trust recommendations from people they know and 63 per cent are more likely to trust consumer opinions posted online. So caring about word-of-mouth – a pre-store source of information is really important,” said Hong.

“Besides, reputation of retailers, product quality, a wide range of products and counseling skills of sales persons are key drivers to select a store chain,” added Hong.

Thanh Thuy | vir.com.vn

Business & Investment Opportunities
Saigon Business Corporation Pte Ltd (SBC) is incorporated in Singapore since 1994. As Your Business Companion, we propose a range of services in Strategy, Investment and Management, focusing Health care and Life Science with expertise in ASEAN 's area. We are currently changing the platform of www.yourvietnamexpert.com, if any request, please, contact directly Dr Christian SIODMAK, business strategist, owner and CEO of SBC at christian.siodmak@gmail.com. Many thanks.

Vietnam - Samsung in R&D race against time

Samsung Electronics Vietnam is struggling to build a research and development facility in Hanoi that will enable the firm to be officially recognised as a hi-tech one in Vietnam.

According to a document sent by Bac Ninh People’s Committee to the State President’s Office, all of the locations Hanoi People’s Committee suggested to Samsung Electronics Vietnam were not favourable to the mobile-phone maker.

Samsung currently runs a $670 electronic manufacturing complex in northern Bac Ninh province. Last week, the provincial people’s committee announced that it was about to grant Samsung a certificate for investing an additional $830 million in the complex, raising its total investment in Vietnam to $1.5 billion.

Since Samsung first proposed to build a research and development (R&D) centre in Hanoi last year, Hanoi People’s Committee has introduced three locations in Dong Anh district. However, Samsung refused to set up an R&D centre at these locations because of the distance to the city centre and high land rental rates, ranging from $1,500 to $2,000 per square metre. In addition, the locations are rice cultivated land that could lead to difficulties in site clearance.

If Samsung Electronics Vietnam cannot find a location, it would fail to meet the R&D criterion so as to be labelled as a “hi-tech” firm. Only when recognised as a hi-tech firm Samsung could enjoy the highest corporate income tax incentive of 10 per cent, against the standard rate of 25 per cent.

According to Vietnam’s Law on High Technology, a company will be recognised as “hi-tech” if it satisfies some criteria, including manufacturing hi-tech products listed by the government, average total expenditure for R&D activities in Vietnam during the first three years equalling at least 1 per cent of its total annual turnover and more than 1 per cent of its total turnover from the fourth year.

If Samsung does not meet the criteria, the world’s leading mobile-phone-maker would have to return all tax incentives it has received in the first three years of operation.

Ngoc Linh | vir.com.vn

Business & Investment Opportunities
YourVietnamExpert is a division of Saigon Business Corporation Pte Ltd (SBC), Incorporated in Singapore since 1994. As Your Business Companion, we propose a range of services in Strategy, Investment and Management, focusing Healthcare and Life Science with expertise in ASEAN. Since we are currently changing the platform of www.yourvietnamexpert.com, if any request, please, contact directly Dr Christian SIODMAK, business strategist, owner and CEO of SBC at christian.siodmak@gmail.com. Many thanks.

Vietnam – Made-in-Vietnam phones only have plastic covers made in Vietnam

VietNamNet Bridge – Vietnam’s phone set exports have been increasing steadily year after year. However, most of the exports are made by foreign invested enterprises.

According to the General Department of Customs (GDC), the phone set export turnover had reached 9.24 billion dollars by mid October 2012, an increase of 4.66 billion dollars (101.8 percent) in comparison with the same period of the last year.

Phone manufacturers still have been gaining high growth rates despite the economic downturn. However, “phone manufacturers” here mean foreign invested enterprises, not Vietnamese.

The made-in-Vietnam products

Vietnam reportedly exports 2.3 billion dollars’ worth of phone sets in 2010. Since that year, phones have been added into the list of the key export items of Vietnam and the list of the products with high growth rates.

In the first nine months of 2012, the phone set export turnover reached 8.63 billion dollars, up by 122 percent in comparison with the same period of the last year.

However, the high export turnover does not mean the strong development of the Vietnamese phone manufacturing industry.

2009 and 2010 were considered the golden age for the manufacturers that make the products bearing Vietnamese brands, namely Q-Mobile and Bluefone.

The “Vietnamese brand mobile phones” means the products are bearing Vietnamese brands, but are made in China. The only thing that can be made in Vietnam is just the phone’s plastic cover, which makes up less than one percent of the value of the product.

“We don’t have chip, board or battery manufacturing factories. How can we make really Vietnamese mobile phone products?” said Dinh Anh Huan, Business Director of The Gioi Di Dong (Mobile World), one of the biggest mobile phone distribution chains in Vietnam.

Dr Nguyen Minh Phong, a well-known economist, said that Vietnamese enterprises deserve no credit for the high achievement.

The big export turnover of mobile phone products has been associated with the South Korean manufacturer Samsung whose export turnover is up to one billion dollars a month.

What does it mean by “Vietnamese phone industry?”

Experts all affirm that Vietnam still cannot make mobile phone products from A to Z. Vu Minh Tri, General Director of Microsoft Vietnam, said Vietnamese enterprises just simply assemble parts, or import finished products for domestic sale, do the marketing for foreign products, or make some mobile apps.

Nguyen Van Dao, Deputy General Director of Samsung Vina, also said made-in-Vietnam mobile phones have been churned out and distributed all over the world since 2009, when a Samsung’s mobile phone factory in Bac Ninh province became operational.

However, a purely Vietnamese mobile phone, designed and made in Vietnam, or designed and outsourced to foreign companies has not come out yet.

“Vietnam still does not have a fundamental for the electronics – telecom industry. We can design some parts of the products or organize small scale production, but we are not experienced enough to design and make a complete product,” Dao said.

A long path ahead

In early October 2012, Viettel Group launched into the market Sumo 2G mobile phone V6206, stating that the product is designed by Viettel and made on its production line. This is a very important step made by Viettel in implementing its strategy to produce telecom equipments.

However, experts say with the product, Vietnam is still at the very beginning of the mobile phone industry development, and that Vietnam still needs to do many more things before it can obtain a phone manufacturing industry.

Tien Phong

Business & Investment Opportunities
YourVietnamExpert is a division of Saigon Business Corporation Pte Ltd, Incorporated in Singapore since 1994. As Your Business Companion, we propose a range of services in Strategy, Investment and Management, focusing Healthcare and Life Science with expertise in ASEAN. Since we are currently changing the platform of www.yourvietnamexpert.com, you may contact us at: sbc.pte@gmail.com, provisionally. Many thanks.

Vietnam - Vietnamese businesses’ role in hardware industry gets shrunk

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 
YourVietnamExpert is a division of Saigon Business Corporation Pte Ltd, Incorporated in Singapore since 1994. As Your Business Companion, we propose a range of services in Strategy, Investment and Management, focusing Healthcare and Life Science with expertise in ASEAN. We also propose Higher Education, as a bridge between educational structures and industries, by supporting international programmes. Many thanks for visiting www.yourvietnamexpert.com and/or contacting us at contact@yourvietnamexpert.com

Brunei - New e-system makes process of business licensing easier, faster in Brunei

Bandar Seri Begawan (The Brunei Times/ANN) - The e-Government flagship project, the Business Licensing System (BLS), is aiming to be functional by the middle of this year, giving applicants a streamlined process when applying for a new business, translating to an improvement in the Sultanate's Ease of Doing Business (EODB) rank.

Government officials, Vascco Taman, Mak Hon Sheng, and Ya-Anenawati Hj Md Yusuf, of the BLS Secretariat, briefed The Brunei Times on the current status of the project, and are hopeful that the project can be in service this year.

"Currently, the BLS is in the design stage and covers three out of the nine indicators in Ease of Doing Business (EODB), which are: Starting a Business, Dealing with Construction Permit and Getting Electricity," Vascco explained.

Vascco, the project manager for the BLS, said that this new system will provide an "online single window", where applicants only need to visit one place that is related to business licensing applications

"Besides that, the BLS will provide integrated forms; information hubs; a consolidated payment and standardised processes; parallel processing; easy, 24/7 access; and greater transparency," said Vascco.

Currently, without the BLS, applicants who wish to start a business has to go to 13 different agencies (should their business require all the different licenses), to get each individual license.

Mak, who is a member of the secretariat, said that if a license is required to operate a restaurant it will be listed down as well in the system.

"Example, if a person wants to start a restaurant business, the system will show all the required licenses, like the AGC (Attorney General Chambers) for the restaurant's name, Labour Department for the workers, the need for a Halal Certification and so on," said Mak.

Several of the 13 agencies include Land Transport Department; Halal Certification from the Ministry of Religious Affairs; Labour License from the Department of Labour; Department of Water Services; Department of Electrical Services; and Miscellaneous Licenses from the Ministry of Home Affairs, to name a few.

"With the BLS, they can simply apply online or at our new Business Facilitation Centres (BFC), which will be available at all four districts, where everything can be done at one place," he said.

Vascco further added: "Our objective with the BLS is to reduce the overall timeframe taken to complete a business licensing application and improve the overall TPOR (Client Charter)."

The BLS also hopes to eliminate any redundant and inefficient internal processes, and to establish an online medium for business licensing application.

Another example Vascco gave: "If you go to the ABCI (Authority of Building Control and Construction Industry (ABCI), they have their own procedures which varies from the Municipal Board, but has the same purpose."

"With our study, we are trying to streamline this process, so applicants don't get confused and uses a standardise process," he said.

Secretariat member, Ya-Anenawati added: "For an Application of Planning Permit, if it is in Municipality jurisdiction, the application must go to the Municipal Board, or if it is outside of it, then it will go through the Town and Country Planning."

The BLS, when implemented, will eliminate the need to solve this, as it is intelligent enough to identify where the application is to be sent.

With regards to a more convenient process, Ya-Anenawati gave another example, saying if an applicant has to do 12 different visits to get a license, and go from say Muara, then the agriculture office, then back to Muara, and to customs, it's a tedious process.

"With BLS, the system will do the routing for them, so applicants will just apply online and collect the licenses when it's ready at BFC," she said.

This project is also aiming to be transparent towards potential businessmen, promising applicants the ability to track and view what the status of their current application is at.

"If it is rejected, and they wish to enquire for more information, they can still be informed about the application," he said.

The proposed BLS process will go as follows: An Applicant or Qualified Person applies to the BLS; then makes online payment; which will then be submitted to the respective departments; followed by an internal process to update the BLS status; where the final application outcome is notified to the respective applicant either by mail, e-mail and SMS; that allows a notification to the applicant to collect the physical license at the BFC.

Currently, there are 30 licenses from the various departments under the BLS and the number is expected to continue rising in the future.

The BLS is a collaborative project championed by the Ministry of Industry and Primary Resources and Ministry of Home Affairs, and involves various different government and non-government agencies.

Goh De No in Bandar Seri Begawan/The Brunei Times | ANN

Business & Investment Opportunities

YourVietnamExpert is a division of Saigon Business Corporation Pte Ltd, Incorporated in Singapore since 1994. As Your Business Companion, we propose a range of services in Consulting, Investment and Management, focusing three main economic sectors: International PR; Healthcare & Wellness;and Tourism & Hospitality. We also propose Higher Education, as a bridge between educational structures and industries, by supporting international programs. Sign up with twitter to get news updates with @SaigonBusinessC. Thanks.