Manufacturing in Vietnam Archives

Vietnam Smartphone Shipments Double QoQ in Q4 2021, Up 15% YoY; Samsung Retains Top Spot

Vietnam’s smartphone shipments soared 104% QoQ in Q4 2021.
Samsung retained the top spot, capturing 28% share, followed by vivo (18%) and OPPO(17%).
With its iPhone 13, Apple surpassed Xiaomi to rank fourth, its best ever show in Vietnam.
For the full year of 2021, smartphone shipments increased 7% YoY.

Beijing, Seoul, Taipei, London, Boston, Toronto, New Delhi, Hong Kong – February 10, 2022

Vietnam’s smartphone shipments increased 15% YoY and 104% QoQ in Q4 2021, according to Counterpoint Research’s Monthly Vietnam Channel Share Tracker. After crossing the post-pandemic phase of pent-up demand, smartphones remained in high demand throughout the year, despite the market facing many difficulties, including macroeconomic worries, supply chain issues and the emergence of new COVID-19 variants. The year 2021 also saw Samsung and Apple registering their highest ever shipments in Vietnam.

Top OEMs’ Market Share in Vietnam, Q4 2020 vs Q4 2021

Source: Counterpoint Research’s Monthly Vietnam Channel Share Tracker
Notes: Xiaomi includes POCO and Redmi; OPPO includes OnePlus; Figures may not add up to 100% due to rounding.

Commenting on the quarterly performance, Senior Research Analyst Ivan Lam said, “Vietnam’s smartphone market has been dominated by offline channels. COVID-19 forced the government to impose multiple lockdowns, which hugely impacted the mobile phone distribution chain. As a result, shipments in Q3 2021 reached their lowest point in 2021. A few key positive factors drove up the numbers in Q4 2021. First, increasing vaccination rates helped offline channels move towards normalcy. Second, Apple’s iPhone 13 and other new launches, some pent-up demand and the approaching Vietnamese Lunar New Year stimulated purchase activities. Third, Samsung and Chinese brands managed to resume their supply and logistics activities in Vietnam. Lastly, the country’s major cities such as Ho Chi Minh City released guidelines that required people entering these cities to show a QR code from a mobile app to prove their vaccination status or recovery from COVID-19. This also pushed people to switch to a smartphone or an upgrade.”

Apple was the fastest growing brand in Q4 2021 in YoY terms. With a hair’s breadth, it surpassed Xiaomi to capture the fourth highest market share during the quarter. Lam added, “Apple enjoys a good place among Vietnamese consumers. In 2021, Apple enhanced its distribution strategy in Vietnam. It pushed online sales through Lazada Apple Flagship Stores and boosted “mini Apple Stores” by working with retailers, although there are already Apple Zones in Thegiodidong stores and F.Studio in the FPT shops system. Also, in Vietnam, 5G smartphone penetration is increasing gradually, supporting iPhone 13 sales.”

Vietnam Smartphone Shipment Share, 2020 vs 2021

Source: Counterpoint Research’s Monthly Vietnam Channel Share Tracker
Notes: Xiaomi includes POCO and Redmi; OPPO includes OnePlus; Figures may not add up to 100% due to rounding.

Vietnam’s smartphone shipments grew 7% YoY in 2021. Research Director Tarun Pathak said, “Vietnam is one of the most active consumer electronics markets in Southeast Asia, as well as one of the Asian countries with highest internet penetration. Although COVID-19 continued to disrupt the market, the demand was always there. We expect this rebound to continue in 2022.”

Apple showed the highest YoY growth in 2021 at 119%, followed by vivo at 24% and Xiaomi at 19%. Although OPPO (including OnePlus) ranked second in terms of market share in 2021, its growth declined 6% YoY during the year. Senior Research Analyst Glen Cardoza said, “OPPO was hugely impacted by the COVID-19 lockdowns in Q2 and Q3 because its main strength is offline channels. Also, OPPO experienced a shortage of 4G SoCs. However, it bounced back in Q4, showing 88% QoQ growth. We see OPPO showing stable performance in 2022.”

Online channels made up 15% of the total shipments in 2021, growing 8% YoY. It’s not a big jump because the country’s logistics systems and digital payment ecosystem are still in the process of being developed.

Despite all difficulties, Vietnam’s smartphone market is expected to continue to grow in 2022 and be one of the most competitive markets in Southeast Asia.

Please reach out to press (at) counterpointresearch.com for press comments and enquiries.

You can also visit our Data Section (updated quarterly) to view the smartphone market share for World, US, China and India.

Background

Counterpoint Technology Market Research is a global research firm specializing in products in the TMT (technology, media, and telecom) industry. It services major technology and financial firms with a mix of monthly reports, customized projects, and detailed analyses of the mobile and technology markets. Its key analysts are seasoned experts in the high-tech industry.

Analyst Contacts:

Ivan Lam

Glen Cardoza

Tarun Pathak

Follow Counterpoint Research

Vietnam Smartphone Shipments Down 28% YoY in Q3 2021 on COVID-19

Hong Kong, London, Boston, Toronto, New Delhi, Beijing, Taipei, Seoul – November 25, 2021

Vietnam’s smartphone shipments witnessed a 28% YoY decrease in Q3 2021, according to Counterpoint Research’s Monthly Vietnam Channel Share Tracker. COVID-19-induced restrictions in Vietnam’s major cities played the biggest role in this slowdown, triggering labour shortages and closure of shops and malls. The ongoing component shortages added to the limited volumes as well. On a monthly level, the market performed well during July while August witnessed a decline in shipments as Vietnam faced its highest ever spike in COVID-19 cases. The cases started to decline in September.

Research Analyst Akash Jatwala said, “Due to the rising COVID-19 cases, the authorities imposed restrictions and lockdowns on major cities. This hit the economy and social life. Most of the manufacturing facilities in Ho Chi Minh City were either closed or operating with limited manpower and volumes. Only 9% of Vietnam’s population had been fully vaccinated during the beginning of the fourth wave.”

Samsung reached its highest ever share in Q3 2021, capturing 49% of the smartphone market. This was due to demand for its fast-moving models like the Galaxy A12, Galaxy A03s and Galaxy A22. Samsung’s emphasis on its A series has started paying off, giving further momentum to its growth in the market. OPPO captured the second spot with a 19% share driven by the A series. Xiaomi and vivo took the third and fourth spots with 13% and 8% shares respectively. The Redmi series was the volume driver for Xiaomi while the Y series grabbed the numbers for vivo.

The online channel made up 13% of the total shipments during the quarter. Even this channel faced logistical issues during the period. To increase online sales, OEMs partnered with online platforms to offer exclusive deals. Samsung partnered with Lazada for the fourth edition of LazMall Super Brand Day, where customers could avail savings at Samsung’s official store. Xiaomi continued to lead in online sales with a share of 36%. Samsung followed with 33%.

5G smartphones made up 20% of the total shipments in Q3 2021. Their share is expected to increase further by the end of 2021. Vietnam has started 5G trials with Viettel becoming the country’s first operator to do so, achieving a top speed of 4.7 Gbps during the trial. Vietnam’s government is also planning to auction 5G spectrum during Q4 2021.

Commenting on the manufacturing scenario in Q3 2021, Senior Research Analyst Glen Cardoza said, “Manufacturing in Vietnam was deeply impacted by restrictions and lockdowns, hitting shipments of major OEMs. Some OEMs like Samsung have a big part of their manufacturing done in the country. While Vietnam is still considered as a preferred location for OEMs, some brands might look to spread their manufacturing facilities across multiple geographies.”

On the bright side, restrictions are currently being reduced while workers have started returning to industrial towns. The vaccination rate is also gaining momentum. We expect smartphone shipments to bounce back in Q4 2021 with improving consumer sentiment.

Background:

Analyst Contacts:

Akash Jatwala

Follow Counterpoint Research
press(at)counterpointresearch.com

Will Vietnam Produce Another VinSmart?

In May this year, Vietnam’s Vingroup announced that its subsidiary VinSmart would stop manufacturing smartphones and televisions. “The production of smartphones or smart TVs no longer brings breakthroughs and creates unique values for users,” said Nguyen Viet Quang, vice-president and CEO of Vingroup. Quang set up VinSmart in 2018 with an aim to raise Vietnam’s smartphone R&D and manufacturing to another level.

VinSmart’s future strategy will take three directions — R&D for VinFast, Vingroup’s carmaker unit; IoT solutions for vehicles and homes; and winding down the smartphone production for partners, such as some US carriers. While the VinSmart’s move looked wise against the backdrop of ongoing component shortages, the real logic working behind the decision is more complicated than expected.

Original Design Manufacturer (ODM) vs ‘Made in Vietnam’

Prior to VinSmart’s exit, a few popular Vietnamese mobile phone brands had already disappeared from the market, such as Q-mobile, Mobiistar, and FPT Mobile. Q-mobile quit the market quite early, around the time the Android smartphone segment started heating up. Q-mobile failed due to cash flow issues stemming from its smartphones’ average cost being two to three times compared to a normal feature phone. Mobiistar tried expanding to India, the second-largest market, to counter competition in its domestic market. Although Mobiistar entered India in a joint venture with a Chinese manufacturer, it was still a wrong move because India was already a very competitive market.

These failures of local brands can be pinned down to their business model. Most of them relied on ODMs (mainly based in China), which means outsourcing design and manufacturing to some other firm. But the Chinese brands, with their manufacturing and supply chain advantages, didn’t take much time to beat the local firms.

Secondly, most of the Chinese ODMs provide Android turnkey solutions, with only minor customizations for the local brands, such as housing, wallpapers, and ringtones. However, with the Vietnamese consumers already becoming used to the variety of features and improvements offered by international brands, the local companies found it difficult to keep pace.

Thirdly, establishing and building a mobile phone brand involves cash burn. But brands like Q-mobile, Mobiistar, and Masstel had no such solid capital. With squeezed margins, it is super-easy to block cash flow. For example, 10,000 handset units costing $50 per unit mean $500,000 worth of goods. But in case these units fail to sell, it would take more than three months to convert this stock back into cash. And for a local brand, $500,000 is a big amount.

Therefore, the ODM business model is very challenging for local brands. But in the light of the abovementioned challenges, VinSmart got a head start. It was backed by Vietnam’s biggest business group, which believed in promoting ‘Made in Vietnam’.

Was VinSmart a Success?

Looking at VinSmart’s past performance, it ranked among the top four OEMs (by volume) both in Q1 2020 and Q1 2021.

Vietnam Smartphone Market Shipment Share

VinSmart managed to impress the market and consumers alike. The channels were happy to have such a ‘Made in Vietnam’ brand on their shelves. The key selling points (KSPs) for VinSmart were:

Made in Vietnam (Manufacturing).
R&D in Vietnam after teaming up with Spain’s BQ.
Cost-effective and better than Xiaomi.

All this made VinSmart stand strong in the $150 and below segment (wholesale price). As much as 70% of VinSmart’s smartphone sales came from this segment.

From a strategic point of view, it is reasonable and practical to scale up the volume in the mid-low segment and then climb up the value chain by frequently launching flagship models. For sure, VinSmart was in for a bright future.

Why VinSmart Decided to Exit Market?

The news of VinSmart exiting the smartphone and television business was indeed sensational. Besides the obvious reasons, there were still some unfathomable causes behind the move.

VinSmart entered Spain, Russia, and some other markets even when that would have meant increased brand-building and other expenses. What triggered the foreign foray was the size of Vietnam’s market. The country, with around 100 million population, sees a mobile phone volume of around 2 million per month, of which VinSmart had a 10% share. The company’s ambitions were far bigger to be satisfied by this user base. And that, in turn, contributed to the latest move.

On the R&D front, the results were not strong enough to differentiate VinSmart from other brands. Its OS, called VOS, was just a customized Android OS.

Vietnam’s government is keen to transform the country into a manufacturing giant. In the long run, Vietnam’s development heavily relies on foreign investment and overseas markets. Foreign companies in Vietnam take up 70% of its foreign trade. As much as 25% of Vietnam’s total exports are taken by Samsung, which set up its first smartphone production line in the country around 10 years ago. However, Samsung’s arrival started to change the industry’s labor structure in Vietnam. Top-quality manpower became difficult to find for VinSmart even as it strived for ‘Made in Vietnam’.

To conclude, VinSmart had no choice as both resources and core competencies were in short supply to sustain the ‘Made in Vietnam’ push.

Market after VinSmart

Today, if we visit the website of Thegiodidong, Vietnam’s biggest organized chain store, there are only Masstel and Vsmart in terms of local brands. Masstel has only feature phone models on sale with the highest price of 550,000 VND (~$24). So, is this an end for local brands? Right now, the answer seems ‘no’. It is unlikely that any local brand will rise in the near future to capture the space vacated by VinSmart and take on the international biggies.

Mobile World (thegiodidong.com) Mobile Phone Category Capture Jul 2021

However, Vietnam’s government has a clear aim of improving the country’s industrial capabilities in the next 10 years. Therefore, in the long run, another local challenger is likely to rise in the Vietnamese market.

“Vietnam’s electronics industry is developing, and it certainly needs a leading local mobile phone brand,” said Tran Viet Hai, CEO of Bkav Electronics, the company that produces Bphone, as well as famous anti-virus software.

Podcast: Online Channels Help SEA Beat COVID Blues, Attract OEMs

The South East Asia (SEA) smartphone market declined in the first half of 2020 due to COVID-19 lockdowns. But as the restrictions started to ease, OEMs were quick enough to focus on online channels to meet the pent-up demand. Online channels in Indonesia reached their highest point in Q4 2020, with brands like Xiaomi and realme leading online sales. Thailand’s smartphone market also saw online channels registering strong growth, leading to only a marginal overall annual decline.

With the pandemic, the market dynamics completely changed with Lazada leading the pack in the region and Shopee being the fastest-growing e-commerce platform. Smaller platforms like Bukalapak, Blibli, Akulaku and JD.ID also saw increased presence in the online space. But what were the key factors contributing to the growth? How are smartphone makers and e-commerce platforms working closely to meet consumer demand?

In the latest episode of ‘The Counterpoint Podcast’, host Maurice Klaehne is joined by Senior Research Analyst Glen Cardoza to talk about the dynamics of SEA smartphone market and growth of online channels. With COVID-19 causing disruptions in the supply chain, smartphone makers have been recalibrating and diversifying production to reduce overreliance on China. But what makes Vietnam an attractive option for smartphone makers to invest in? Glen shares some valuable insights on this topic and more.

Hit the play button to listen to the podcast

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Vietnam Soars in Global Supply Chains on Favourable Conditions

Vietnamese electronics manufacturing services (EMS) market will grow at a CAGR of 5% between 2020 and 2026. According to Vietnam’s General Statistics Office, the country’s consumer electronics sector recorded its highest ever production at 369.6 million units in October 2020, followed by the electronic components sector at 325.7 million units.

Given the exponential growth in its manufacturing sector along with growing domestic demand and exports, primarily in electronics and automobiles, the EMS business is projected to scale new heights in the country. Many global OEMs and EMS providers like Samsung, LG and Foxconn (Apple’s contract manufacturer) are investing in the production of printed circuit boards, camera modules, printers, servers, phones, networking equipment, televisions and other electronics equipment in the country.

Samsung, which in 2020 held almost 70% of the handset market share in Vietnam, is also one of the largest FDI players in the country. Vietnam has one of Samsung’s largest smartphone production bases outside South Korea. By 2022, Samsung is also projected to complete its $220-million research and development centre in Vietnam.

Investment climate in Vietnam

Despite the setback caused by COVID-19, Vietnam is one of the few countries in Asia that managed to record a positive GDP growth in 2020.

The constant improvement in investment and business policies, participation in bilateral and multilateral free trade agreements, increased FDI and geographical proximity to China have all been active factors in making Vietnam a favourable destination for manufacturers.

Pegatron has pegged almost $1 billion worth of investment in its Vietnamese plant that will be rolled out in three phases, targeting investments in computing, communication and consumer electronics facilities, by 2027.

Foxconn is also moving some parts of its iPad and MacBook assemblies to Vietnam from China against the backdrop of rising US-China tensions, thus seeking to derisk its production. It has also been awarded a licence to build a $270-million plant to produce laptops and tablets in Vietnam.

Google too is moving production of its smartphone brand Pixel for the US market to Vietnam. It is also likely that the company may end up moving its hardware production to Vietnam. Similar plans are underway at companies like Samsung, itel and Microsoft.

Xiaomi too is aiming to take advantage of cheap labour and other favourable market conditions in Vietnam. Most recently, the company opened its first phone assembly factory in Vietnam.

Successful absorption from China

Like China, Vietnam is known for its comprehensive and mostly five- to ten-year strategies, like ‘Made in Vietnam 2025: Industrial Policy and Strategy 2025’ and Vision for 2035. These policies have not only helped in changing Vietnam’s growth story which started 30 years ago but have also facilitated absorption of industry from China, including the shifts triggered by trade wars.

Its unprecedented pursuit for business-friendly policies, liberalisation of its economy, low wages, favourable demographics and successful pushing of its infrastructural capacities are all catalysts in making Vietnam a suitable ‘China Plus One’ destination in the global supply chain. As economies around the world look to derisk the heavily integrated supply chain ecosystem in the post-COVID-19 era, along with a heated US-China trade war, foreign investors like Google, Microsoft and Samsung feel better diversifying their risks.

Government strategy for future development

The Vietnamese government aims to have over 10 strategic locations in the IT segment by 2025 with revenues of more than $1 billion. Under its IT and Made in Vietnam programs, it aims to have over 100,000 tech firms to make Vietnam among top 30 countries in IT development in the coming years.

Vietnam’s growing capacity under the ‘China Plus One’ policy reflects the following trends:

With its 2025 vison, Vietnam aims to target fields with high value-addition and export potential.
The electronic equipment and automobile sectors, along with other industries like textile, seem to be gaining a lot of traction.
Vietnam wants to develop its supporting industries, especially mechanical goods, chemicals and telecommunications, to significantly leverage its position in the global supply chain.
The aim is to develop priority industries in key economic zones and coastal zones along with processing industries and supporting industries.
Vietnam is also aiming to get FDI from companies that could transfer technology and capacity to local industries and talent.

Conclusion

With Vietnam’s recent ascension to the ranks of the global supply chain hubs, it is easy to overlook the fact that Vietnam is still expanding and growing its infrastructure. With more companies moving their operations to Vietnam, the leasing demand in Vietnam’s industrial zones is soaring.

However, Vietnam’s growing competitiveness, market reforms, and steady progress in ease of doing business (evident in its higher scores in the World Economic Forum’s competitiveness index) are making it rise above the rest.

In an era of protectionism where the jitters of COVID-19 are still being felt by many economies, Vietnam is soaring to become one of the prime locations for export manufacturers. With its continuous and proactive efforts for open border partnerships (the country is part of over a dozen free trade agreements), Vietnam is a country that could possibly change the course of the tech era that lies ahead.

Will Vietnam Challenge China’s Manufacturing Leadership in the Electronics Industry?

Ever since 2018 and the deterioration in the trade relations between the US and China, various electronic manufacturers are moving production away to Vietnam. Samsung closed its mobile phone manufacturing facilities in Shenzhen and Tianjin in 2018 while expanded investment to Vietnam. Soon, we also saw Nintendo asking Foxconn to move a part of the production of the Switch to Vietnam. Foxconn is also considering moving part of iPhone production lines to Vietnam, and its subsidiary Sharp is planning to move PC production to Taiwan and Vietnam.

The reason for the shift outside China varies for different companies. But largely it is the fear of tariff hikes by the US due to its trade tensions with China that have resulted in companies’ decision to relocate factories. In all of this, Vietnam is gaining. As of Q1 2019, FDI (Foreign Direct Investment) into Vietnam reached US$10.8 billion, up 86.2% year-on-year (YoY). Also, the value of Vietnam’s exports to the US grew by 26% YoY to US$13 billion.

So why are companies picking Vietnam as the manufacturing alternative for China? Will Vietnam be able to challenge China’s manufacturing leadership in the global electronics industry? Below is our analysis which answers these questions.

There are several reasons why Vietnam is an attractive destination for global electronics manufacturers. Lower trade tariffs, lower CIT (Corporate Income Tax), labor dividend, and lower manufacturing wages are some of its strengths when it comes to attracting investments.

In terms of trade tariffs, Vietnam has already signed around a dozen free-trade pacts with several countries and economic blocs. The US, EU (Europe Union) and various other countries have a much more favorable tariff policy on exports from Vietnam as compared to those from China.

Secondly, while the standard CIT in mainland China is 25%, it is only 20% in Vietnam. Besides, the government also offers various tax incentives to attract foreign investments to Vietnam.

Further, as of April 2019, Vietnam’s population has exceeded 96 million and as much as 44% of the total Vietnamese population is younger than 25. The abundant young population creates a competitive labor dividend for the development of the manufacturing industry.

Even in terms of wages, Vietnam is much more competitive than other countries in the region. According to data from Bloomberg and Japan External Trade Organization, Vietnam’s manufacturing wages are among the lowest in Asia.

Despite the benefits, there are risks and challenges that manufacturers need to aware while moving factories to Vietnam. For the detailed analysis and supporting data on the strengths, risks and challenges of manufacturing in Vietnam, as well as the comparison on Vietnam versus China, please refer to the full report at this link.

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Vietnam Smartphone Shipments Double QoQ in Q4 2021, Up 15% YoY; Samsung Retains Top Spot

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