Cost is still the main consideration in the Vietnamese handset market, and Vinsmart will likely pursue a strategy executed by many successful brands: plenty of features at a low price-point, according to Fitch Solutions.
The endeavor signals Vingroup’s focus to diversify revenues away from its core retail and real estate segments, and to shore up a domestic smartphone manufacturing sector that has largely been trailed by foreign players. The move, more significantly, highlights Vietnam’s attractiveness as the upcoming consumer electronics manufacturing hub in Asia, stated Fitch Solutions in its latest report.
Ventures by bigger domestic players, including IT services giant FPT with its F-Mobile handsets, and mobile services market leader Viettel with Viettel Phone have not gained meaningful market share. Vietnamese phone makers have largely lacked scale and innovation capabilities domestically, forcing them to instead rely on Chinese production lines to manufacture their own-brand handsets.
So the key to this strategy is an upcoming VinSmart manufacturing plant costing VND1.5 trillion (US$64.6 million), which will reportedly have the scale to produce 300,000 smartphones annually. The group in June 2018 acquired a majority stake (51%) in Spanish consumer electronics maker BQ, and has highlighted that it will leverage the company’s intellectual property to produce its handsets. BQ is already a well-established smartphone maker with considerable traction in European markets.
According to Fitch Solutions, VinSmart is expected to leverage its parent’s strong brand name, which is present in the real estate and retail sectors, among others, to generate excitement for its products. As a starting point, it will likely seek to sell its smartphones through its over 1,200 supermarkets and convenience shops nationwide.
Moreover, it will first focus strongly on its home market and other regional emerging markets, such as Myanmar, Laos and Cambodia, before going on to penetrate other frontier markets. It is also likely to enter other product segments; the company has stated it also aims to manufacture ‘smart products’ such as smart TVs and also tablets, a segment that BQ is already present in.
However, Samsung is projected to maintain its market leader’s role in Vietnam, having successfully established its business in the country through its low-end Galaxy J series of devices. The company picked Vietnam as a key manufacturing base, and currently operates eight production facilities and a research and development (R&D) center in the country.
The company contributes significantly to Vietnam’s total smartphone exports, which reached USD42.74 billion in 2017. While Samsung’s success highlights the potential of Vietnam’s booming electronics manufacturing industry, the report highlighted that rising labor costs could impede the growth of the sector.
