Telephones and Components

The exports of telephones and replacement parts have maintained the leading position among Vietnam's four biggest forex earners, each fetching more than US$10 billion turnover.

Quantity, size and market share
Over the past five years (from 2012 to 2017), the number of electronics businesses doubled and reached 1,237 by 2015. The total number of employees in the industry increased three times from 238,821 in 2011 to 611,429 employees by the end of 2017, of which about 70 per cent were female workers and over 85 per cent were under 35 years old.
FDI enterprises account for only about one third of the total number of Vietnamese electronics enterprises but own more high technologies, occupying over 80 per cent of the domestic market and over 90 per cent of export turnover. At present, local enterprises engage in only assembling and processing. They are still producing low profit products with added value only increasing from 5-10 per cent per year.
Telephone and component manufacturers are mainly located in the Red River Delta (Hanoi) and neighbouring provinces such as Bac Ninh, Hai Phong, Hung Yen and Thai Nguyen and the Southeast region ( Ho Chi Minh City and neighbouring provinces such as Dong Nai, Binh Duong and Long An). The major players in this field are Samsung, Foxconn, LG, Panasonic, Intel, etc.
By July 2018, the market share by unit of telephone companies in Vietnam are Nokia 25.9 per cent; Samsung 23.3 per cent; Oppo 13.2 per cent; Masstel 6.4 per cent; Apple 4.7 per cent and the remaining ones 26.5 per cent.

Manufacturing telephones and spare parts in Vietnam
Vietnam is currently the centre of the world in the manufacture of telephones and components. Most major electronics companies in the world are present in Vietnam such as Samsung, LG, Intel, Panasonic, etc. This is followed by a series of supporting enterprises. At present, Samsung Thai Nguyen, Samsung Bac Ninh and many other Samsung factories across Vietnam are producing about one third of the world's mobile phones.
In Vietnam, according to the General Statistics Office (GSO), in August 2018, the output number of telephones was estimated at 16.5 million units, up 10.7 per cent from the previous month. In the first 8 months of 2018, Vietnam's mobile phone output was estimated at 131.9 million units, down slightly by 2.3 per cent from the same period in 2017.
Production categories:
- Smartphones priced under VND3 million had the highest output in the first eight months of 2018, reaching nearly 30.13 million units, of which, Thai Nguyen province accounted for 90.1 per cent with 27.13 million units, down 27.5 per cent.
- Smartphones priced from VND3 million to less than VND6 million reached 29.33 million units, down 0.2 per cent. Thai Nguyen accounted for 60.1 per cent; while Bac Ninh accounted for 39.9 per cent of the total unit number in this category.
- The output of smartphones which cost between VND6 million and VND10 million increased 37 per cent to 21.25 million units. Smartphones priced at over VND10 million have been mainly produced in Bac Ninh, with an output of over 10.65 million units, a sharp increase of 58.5 per cent.

Exporting telephones and spare parts
The export turnover of mobile phones and components, which has kept the leading position in recent years, has contributed significantly to the trade balance of Vietnam and helped to limit the trade deficit.

According to statistics by the General Department of Vietnam Customs, the export turnover of telephones and components in August 2018 was over US$5.16 billion, up 33.6 per cent over the previous month and up 25 per cent over the same period last year. By the end of the first eight months of 2018, the exports of mobile phones and components reached over US$31.67 billion, up 18.5 per cent from the same period of 2017, accounted for 19.96 per cent of Vietnam’s total exports and maintained the leading position in terms of export turnover of the country’s commodity groups in the first eight months of 2018.
Export of FDI enterprises: In August 2018, the export of mobile phones and spare parts of FDI enterprises reached over US$5.14 billion, up 33.7 per cent from last month and up 25.1 per cent over the same period of 2017, and accounted for 99.78 per cent of Vietnam’s total export turnover of telephones and replacement parts. In the first eight months of 2018, the exports of telephones and components of FDI enterprises reached over US$31.53 billion, up 18.6 per cent over the same period last year and accounted for 99.71 per cent of the total export turnover of telephones and spare parts.

Export categories:
- Fully finished mobile phones: In the first 8 months of 2018, Vietnam’s export turnover of fully finished mobile phones reached over US$21.76 billion, up 10.6 per cent over the same period last year. In August 2018, the country's fully finished mobile phone exports gained over US$2.96 billion, up 19.2 per cent from the previous month.
- Telephone components and accessories: In the first 8 months of 2018, the total export turnover of telephone components and accessories reached over US$9.86 billion, up 40.7 per cent over the same period in 2017. Specifically, the exports of components and accessories in August 2018 reached over US$2.19 billion, up 59.5 per cent over the previous month and up sharply, 143.5 per cent, over the same period last year.
Major exporters of mobile phones and components include Samsung Electronics Vietnam Thai Nguyen Co., Ltd; Samsung Electronics Vietnam Co., Ltd., Samsung Display Vietnam Co., Ltd; LG Display Vietnam Hai Phong Co., Ltd, and Fuhong Precision Component Co., Ltd (Bac Giang).

Export markets: Vietnam exports telephones and components to 40 markets, including the EU, China, the US, Korea, the UAE, ASEAN, Hong Kong (China).
Specifically, the exports of phones and components to the EU market ranked first in terms of turnover in the first eight months, reaching over US$8.76 billion, up 12.4 per cent over the same period last year and accounting for 27.72 per cent of total exports. Chinese market ranked second in export turnover in the first eight months, reaching over US$4.19 billion, up sharply 210.6 per cent over the same period last year and accounting for 13.27 per cent of total export turnover. The exports of mobile phones and components to the United States in the first eight months reached over US$3.53 billion, up 38.5 per cent over the same period last year and accounting for 11.18 per cent of total export turnover.
Importing telephones and replacement parts
According to statistics from the General Department of Vietnam Customs, in August 2018, the country's imports of telephones and components reached over US$1.89 billion, up 35.3 per cent over the previous month and up 29.8 per cent compared to the same period last year. By the end of the first eight months of 2018, the imports of telephones and components reached over US$9.29 billion, up 4.4 per cent over the same period last year and accounted for 6.04 per cent of the total imports of the whole country’s goods in the first 8 months of 2018.

Import markets: In the first eight months of 2018, Vietnam's imports of telephones and components from China reached the highest level of over US$5.22 billion, up 13.1 per cent over the same period of 2017, accounting for 56.25 per cent. Imports from Korea reached over US$3.45 billion, up 1.4 per cent over the same period last year, accounting for 37.16 per cent of the total export turnover.

Import categories:
- Import of fully finished mobile phones: In the first 8 months of 2018, Vietnam’s import turnover of fully finished mobile phones reached over US$1.09 billion, a slight increase of 2.5 per cent over the same period last year. Particularly, in August 2018, the imports of fully finished mobile phones reached over US$144.3 million, up 67.9 per cent compared with the previous month and up 49.4 per cent over the same period last year.
- Import of telephone components: In the first eight months of 2018, Vietnam's total import of components and accessories reached over US$8.19 billion, an increase of 4.6 per cent over the same period of 2017. Particularly, in August 2018, the import of components and accessories reached over US$1.75 billion, up 33.1 per cent over the previous month and up 28.4 per cent over the same period last year.
SWOT analysis of Vietnam electronics industry

- Strengths:
+ Vietnam is an attractive destination for FDI flows in the electronics industry.
+ The competitiveness of Vietnamese enterprises joining the global supply chain is increasing considerably.
+ The growth potential of population. With a population of over 90 million, Vietnam is a high potential market for mobile phones.
+ Commitment of the Government on supporting policies for electronics and supporting industries
+ The Government of Vietnam always encourages and supports foreign companies to invest and cooperate with Vietnamese enterprises in the fields of information technology, high technology and supporting industries.
+ Labour costs in Vietnam are relatively low. In particular, operating costs and labour costs in Vietnam are only about one third that of India and half that of China.
+ The cost of construction and operation is low, while the transport infrastructure is convenient.

- Weaknesses:
+ Most materials have to be imported.
+ The electronics industry is still dependent on FDI enterprises.
+ The technical qualification of workers in the electronics industry is not high: 68.75 per cent have no diplomas or certificates. As many as 80 per cent of electronics companies have difficulty in recruiting technicians.
+ The level of production technology of Vietnam's electronics industry is still far from that of other countries in the region.

- Opportunities:
+ Vietnam has a lot of opportunities to attract capital, transfer technology and learn management knowledge and human resources training from the development of electronics industries in the region.
+ Commitments on roadmap of tax reduction for electronics and telephones have taken effect. Vietnam's entry into the World Trade Organisation (WTO) and a series of new Free Trade Agreements (CPTPP, EU-Vietnam FTA) have also created favourable conditions for electronics enterprises to boost the great potential of bringing products to the region and the world.
+ The interest and investment of leading countries in information technology, including the United States, Japan and Korea, will create momentum to attract other investors to participate in the development of Vietnam.

-Threats:
+ Competitive pressure on the domestic market: This is a great challenge for Vietnamese enterprises. The competitiveness of Vietnamese enterprises is weak, evidenced by a small scale, business management experience, technology, weak staff qualifications and low productivity.
+ Vietnam does not yet have a strong enough team to adapt to the requirements ahead of the technology, while "grey matter" of the Vietnamese enterprises has been attracted to transnational companies.
+ The challenge, which the revolutionary industry 4.0 poses for large Vietnamese companies, is huge. Vietnamese electronics companies operating in the electronics sector are all SMEs, most of which lack capital and resources to invest in modern production lines.