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Vietnam Smartphone Sector in Battle for Mid-market Supremacy

While the bigger brands dominate Vietnam's smartphone market, it is many of the more modestly priced models that are now driving growth in the sector. Many companies, however, are falling short when it comes to after-sales service.

Photo: Vietnamese smartphones: Image is all for many purchasers.
Vietnamese smartphones: Image is all for many purchasers.
Photo: Vietnamese smartphones: Image is all for many purchasers.
Vietnamese smartphones: Image is all for many purchasers.

The smartphone market in Vietnam is booming, with big-brand, high performance phones taking the lion's share. The growth of the sector, however, is being driven by the more modestly priced handsets, with many of them coming courtesy of a new generation of highly-competitive market entrants. While smartphones may be getting smarter, customer service is failing to keep up, with many Vietnamese consumers seemingly unimpressed with the typical after-sales service.

According to recent survey by the International Data Corporation (IDC), an international market research company, smartphones now account for 51% of the overall Vietnamese mobile phone market. In the last quarter of 2015, 3.3 million smartphones were sold in the country, at an average price of US$183. During the same period, the net value of smartphone imports totalled $607 million.

At present, many phone providers are discounting high-performance smartphones soon after their initial introduction to the Vietnamese market. The number of lower-priced smartphones imported is also on the increase.

According to IDC, the domestic smartphone market will grow from 15 million units (with a total value of $2.4 billion) in 2015 to 28 million units (worth $3.6 billion) by 2019. Foreign companies will continue to dominate the market, despite concerns over warranty compliance.

High-Grade Smartphones Lead the Market

According to figures from IDC, Samsung and Apple were the most popular smartphone brands in Vietnam in 2015. In total, Samsung took 35.6% of market share in Q2 of 2015, an increase from 30.1% in Q4 of 2014. This saw it consolidate its lead position in the market, partly because it is the only brand to offers 24/7 customer service in Vietnam.

The iPhone accounted the second highest level of revenue, with 24% of market share. Although this represents an 11% drop compared to the last quarter of 2014, IDC maintained that demand for Apple products was not falling, instead the sale of official products was being undermined by purchases made on the grey market.

Despite this, Vietnam remains a viable market for Apple. In line with this, last year saw the official launch of Apple Vietnam LLC.

With a reputation as the phone for businesspeople, Taiwan's HTC is still the brand that most Vietnamese entrepreneurs opt for. The company's total revenue for the first quarter of 2015 was $1.3 billion, an increase of 22% compared with the same period in 2014. The after-tax profit was $11.6 million in Q1 2015. Figures to September 2015 also indicate that the company's overall turnover is continuing to increase.

In the case of Sony, though, 2015 seemed to be a turbulent year for its Vietnamese operation. According to the company, high-grade smartphones, notably the Xperia series, will now be prioritised over its mid- and lower-range models, sectors that are not considered to be the Japanese company's strong points.

Mid- and Lower-Range Smartphones Driving Growth

Despite the market focus on top-range, high-performance smartphones, mid-range models remain a hugely-competitive part of the Vietnamese market. Commenting on the significance of the sector, Vo Le Tam Thanh, IDC's Market Analyst Specialist, said: "As a result of the rapid fall in prices, the penetration rate of smartphones has increased. In fact, the cheaper smartphone segment is the main source of market growth. Six out of 10 smartphones distributed in Vietnam now cost below $150."

Endorsing this view, Nguyen Minh Huy, a Technician with one of Ho Chi Minh City's largest mobile networks, said: "Mid-grade phones are proving their worth, with strong product performance, a wide choice of designs and a number of unique features."

Among the more notable manufacturers in the mid-range segment are Oppo, a Chinese smartphone producer, and Asus, a Taiwanese computer hardware and electronics company.

Oppo is now one of the fastest growing smartphone brands in Vietnam. In Q1 2015, Oppo had 10.4% of the mid-range market share, putting it behind the two big players, Samsung and Microsoft, who command 35.2% and 24.2% respectively. In terms of the Vietnamese market, this saw Oppo exceed the combined turnover of Apple and Asus. Its success is seen as being down to its heavyweight promotional activity, along with its policy of targetting the more remote areas in order to increase its market share.

Photo: Oppo: Success built on advertising.
Oppo: Success built on advertising.
Photo: Oppo: Success built on advertising.
Oppo: Success built on advertising.
Photo: Targetting the young with special offers.
Targetting the young with special offers.
Photo: Targetting the young with special offers.
Targetting the young with special offers.

In 2013, Asus' market share in Vietnam was almost zero. By 2014, however, the success of its super-cheap Zenfone series – the Zenfone 4 is priced at under $90 – saw the company emerge as a significant player. By the end of Q3 2015, this early success had resulted in spectacular growth with Asus ranked as the second largest smartphone vendor in the mid-range sector (after Samsung's 14% market share).

A number of well-known mainland smartphone brands also have a significant presence in the Vietnamese market. The two most notable players here are Shenzhen-based Huawei and Beijing's Lenovo.

Daniel Pang, Head of IDC's Consumer Equipment Research Group, said: "In Vietnam, Microsoft continues to challenge the global trends, while the market has become highly competitive compared to many of the other countries in the region. Microsoft's business strategy is taking a lead in terms of the more affordable products, while Apple and Samsung still dominate in the premium segment."

Taking a wider view, Nguyen Thanh Phong, Owner of a mobile phone outlet in Ho Chi Minh City, said: "Mobile phones are still an attractive market, with many old and new brands prospering in Vietnam. In particular, 2015 proved a good year for those mid-range phones priced over VND3 million [US$150]."

Emphasising the diversity of the market, Tran Ngoc Huy, a Software Engineer with the Ho Chi Minh City-based VNG Corporation, said: "Technological people normally choose an electronic product based on good quality, durability, beauty, and price stability. We actually prefer Apple products. More than 70% of my colleagues are loyal customers of this brand."

Acknowledging the growing significance of brand awareness in Vietnam, Tran Hoang Anh Tuan, a Ho Chi Minh City-based Event Manager, said: "In Vietnam, a lot of people use smartphones to show off, especially in the business and communication industries. As our business is in event management, we have to use up-to-date branded phones and laptops when we attend client meetings.

"Personally, I prefer iPhone and Sony. Sony phones are durable and their batteries last a long time, but theirs designs are not attractive. iPhone has strong configuration, beautiful design, and it makes a good impression. It does, however, have a weak battery and repair costs are high if it gets damaged."

Poor Customer Service

There is a growing perception in Vietnam that many mobile companies don't deliver an acceptable level of customer service, while also failing to comply with Consumer Protection Warranty Law. In a more specific example, many such companies are said to fail to provide users with temporary replacements should their handsets malfunction during the warranty period.

Highlighting this, Tran Ngoc Huy said: "Many phone brands now focus solely on quantity. Before you purchase a product, they promise everything. Post-purchase, though, you are pretty much abandoned.

"A few months ago, for instance, one of my colleagues bought a new Oppo phone for about $500. After using it for a couple of weeks, its operating system proved faulty. Although it was under warranty, the problem was not fixed and she was unimpressed with the after-care she received. As a result, she sold the Oppo and switched to Samsung.

"Oppo has a very sound marketing strategy, with many Vietnamese now familiar with its products. It after-sales service, however, can be a little lacking. The details of the company's warranty programme seem are little unclear and don't always seem to be honoured."

Photo: Vietnamese consumers: Wooed by brands, but let-down by after care.
Vietnamese consumers: Wooed by brands, but let-down by after care.
Photo: Vietnamese consumers: Wooed by brands, but let-down by after care.
Vietnamese consumers: Wooed by brands, but let-down by after care.

Citing a similar perception, Tuan Anh said: "Many brands just chase cheap pricing, while forgetting about product quality, customer experience and their long-term reputation. That makes it difficult for them to compete with the larger companies, the Samsungs, Apples and Microsofts."

Pham Tuong Vi, Special Correspondent, Ho Chi Minh City

Content provided by Picture: HKTDC Research
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