VIETNAM ICT SECTOR BRIEFING 2016

Date: October 2016

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 INFORMATION TECHNOLOGY
Overview
In the International Telecommunication Union, Global ICT
Development Index (IDI) 2015. Vietnam was ranked
102nd(1) from 167 countries. This placed the country at
the 6th(2) position in ASEAN and the 17th(3) in Asia-Pacific.
The Global Information Technology Report 2015 by
World Economic Forum showed that Vietnams Network
Readiness Index (NRI) ranked 85th(4) among 143
countries. Vietnam ranked 2nd(5) worldwide in terms of
network affordability which consists of three variables
(mobile cellular tariffs, fixed broadband Internet tariffs
and the Internet and telephony sectors competition
index). The index assesses the cost of accessing ICT,
either via mobile telephony or fixed broadband internet,
as well as the level of competition in the internet and
telephony sectors.
According to Cushman & Wakefields Business Process
Outsourcing and Shared Service Location Index 2015, one
sector that has witnessed remarkable levels of growth
has been the IT software industry. Vietnam is now home
to over 1,000 software companies(6) that employ over
80,000 people(7). This makes Vietnam one of the worlds
largest software exporters and the second largest
software outsourcer in Japan(8). Rankings of Ho Chi Minh
city and Hanoi in Tholons 2016 Top 100 Outsourcing
Destinations are 18th(9) and 19th(10) respectively.
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BRITISH BUSINESS GROUP VIETNAM (BBGV)
HO CHI MINH CITY OFFICE
G/F, 25 Le Duan Boulevard, District 1, Ho Chi Minh City
Tel: +84 (8) 3829 8430; Fax: +84 (8) 3822 5172
Email: enquiries@bbgv.org
Hardware
The expansion of IT hardware has been thanks to the
development of the network infrastructure, including fixed
and wireless broadband, which in turn, has encouraged the
use of devices for both productivity and content.
Governmental spending has remained supportive of the IT
hardware development especially through initiatives in the
education and healthcare sectors.
The Vietnamese PC market is surprisingly competitive. Most of
the major laptop vendor players having below 10%(11) local
market share. According to IDC report in 2014, the leading
position belongs to Dell, followed by ASUS. Lenovo and Acer
were the 3rd(12) and 4th(13) largest vendors. The cities of Hanoi
and Ho Chi Minh city are reported to contribute approximately
85%(14) of national notebook sales. Tablet volume growth in
2015 increased with volumes up by 12.6%(15) to 1.34 million(16)
in large due to the popularity of lower-cost tablets. There is
considerable potential for vendors of PCs as ownership still
relatively low in Vietnam and also there is also opportunity for
hybrid notebook devices.
Source: BMI Research, Vietnam Information Technology Report Q1 2016
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 INFORMATION TECHNOLOGY
Software
The software market in Vietnam is
highly cost-sensitive. Approximately
75%(18) of the market is served by
lower-cost local suppliers. Government
and SMEs prefer local software while
larger Vietnamese firms often choose
products from multinationals which
take one-quarter(19) of the market
share.
In Vietnam, illegal pirated software is
still widely accessible for use by
households and enterprises.
The best opportunities for foreign
software vendors are within the
banking & finance, oil & gas, aviation
and telecoms sectors.
The government is a major purchaser of
software which accounts for approx.
30%(20) of total IT spending. Potential
areas for expansion include business
intelligence solutions such as ERP, SCM,
CRM, HRM and security; data analytics,
database software and datacentre
software. Cybersecurity is becoming a
pressing issue in Vietnam due to
increased threats and growing
awareness from the government,
businesses and consumers.
Source: BMI Research, Vietnam Information
Technology Report Q1 2016
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BRITISH BUSINESS GROUP VIETNAM (BBGV)
HO CHI MINH CITY OFFICE
G/F, 25 Le Duan Boulevard, District 1, Ho Chi Minh City
Tel: +84 (8) 3829 8430; Fax: +84 (8) 3822 5172
Email: enquiries@bbgv.org
Services Cloud Computing
In 2015 Vietnams IT services segment The value of the Vietnamese cloud
outperformed hardware and software market was approximately USD 46.6
sales growth. Vietnam is becoming an million VND 1.01 trillion(22) in 2015. The
international destination for outsourced countrys strong economic development,
service provision. Rising demand for which covered growing incomes and the
digital infrastructure projects in increase in higher productivity industries
banking, telecoms, energy, smart such as electronics manufacturing and
agriculture and government segments outsourcing, is expected to lead to a
has gained attraction from global IT higher demand for cloud computing
services leaders to invest more in solutions among businesses.
Vietnam.
Cybersecurity is an area that the
government is focussed on to
strengthen domestic infrastructure and
provide assurance to enterprises
looking to outsource to Vietnamese
companies.
In order to facilitate the current fast
growth in the development of IT
services, Vietnam must still address the
gap in the IT workforce. The country is
lacking of well-trained IT workers and it
is estimated that there would be a
million(21) IT engineers needed to
achieve the governments ambitions for
the domestic software and IT services
sector.
Source: BMI Research, Vietnam Information Source: BMI Research, Vietnam Information
Technology Report Q1 2016 Technology Report Q1 2016
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 INFORMATION TECHNOLOGY
Strengths
Supportive policy framework and
funding is in place to promote the
development of the IT sector.
Incentives for ICT investors include a
tax free period for the first 4 years of
operation and a 5-years time with
50% of enterprise tax reduced.
Vietnam's gradual integration into
the global trade network via its
accession into free trade agreements
such as AEC and EUVN FTA, as well as
bilateral agreements with Korea,
Japan.
The domestic IT market is in a rapid
growth phase, with trade
liberalisation and growing
affordability driving increased
adoption among enterprises and
consumers.
Expanding local hardware production
industry with major international
players such as Samsung, LG and Intel
making large investments.
Vietnam is a preeminent global
outsourcing destination, with a
particular strength in the software
development industry.
Weaknesses
IT spend per capita is much lower
than in some neighbouring countries
such as Thailand.
Highly price-sensitive market, putting
pressure on suppliers margins.
High level of software piracy.
Cybersecurity measures by the
government have been pushed
through utilising state security
measures. (With potential human
rights implications.)
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BRITISH BUSINESS GROUP VIETNAM (BBGV)
HO CHI MINH CITY OFFICE
G/F, 25 Le Duan Boulevard, District 1, Ho Chi Minh City
Tel: +84 (8) 3829 8430; Fax: +84 (8) 3822 5172
Email: enquiries@bbgv.org
Opportunities
Broad-based economic growth
forecast to drive retail hardware
market growth as household incomes
increase markedly during 2016-2019.
Decision in July 2014 to enable state
agencies to use outsourced
information technology providers for
the first time opens a new growth
channel for suppliers.
E-government adoption deepening,
with opportunities in government
administration, alongside sector-
specific markets such as healthcare.
Low PC penetration means there is
scope for vendors to tap first-time
buyer market as well as the
upgrade/replacement market. Due to
low penetration desktop and
notebook sales continue to increase
despite competition from tablets.
Low-cost tablets are proving popular
with consumers, with significant
medium-term sales growth potential
as incomes continue to rise.
Vietnam is a popular destination for
software development and IT services
outsourcing, with particularly strong
growth potential from Japanese
enterprises that are turning away
from Chinese based providers.
Small and medium-sized enterprises
have potential to increase spending
on basic solutions, including customer
relationship management and security
systems.
HANOI OFFICE
193B Ba Trieu Street, Hai Ba Trung District, Hanoi
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The government's drive to create an
IT services industry over the next
15-20 years - including the National
Technology Innovation Fund - is
expected to accelerate the
development of local enterprises.
Cloud computing awareness has
risen fast and adoption is expected
to accelerate in the short-to-
medium term as network
infrastructure improves and
awareness levels increase.
Threats
Low-cost tablets made in China
pose a particular threat to low- and
mid-range notebooks. Falling prices
may further undermine margins and
profitability after steep discounting.
Cybersecurity issues could
undermine confidence in IT
solutions and services, with big data
and cloud computing being the
most vulnerable.
Yen depreciation has hit the
software outsourcing market by
making exports less competitive and
eroding Vietnam's cost advantages.
Source: BMI Research, Vietnam
Information Technology Report Q1
2016
4
 TELECOMMUNICATION
Overview
According to the Ministry of
Information and Communications,
Vietnamese telecom corporations saw
impressive results in 2015. Total
revenue of the sector was estimated
at VND 340 trillion (USD 15.1
billion)(23) and profit at VND 56 trillion
(USD 2.5 billion)(24).
Brand Finance listed three
Vietnamese mobile phone operators,
among the Top 20 Most Valuable
ASEAN Telecom Brands in 2016
Viettel (7th)(25), MobiFone (15th)(26)
and Vinaphone (20th)(27). All have
improved their positions in the Global
Telecom Rankings.
Vietnam is an emerging market with a
high mobile subscription rate in Asia -
Pacific (152% of population in 2015)
because of the aggressive price &
promotion competition among
operators in the domestic market
which is dominated by state-owned
enterprises.
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BRITISH BUSINESS GROUP VIETNAM (BBGV)
HO CHI MINH CITY OFFICE
G/F, 25 Le Duan Boulevard, District 1, Ho Chi Minh City
Tel: +84 (8) 3829 8430; Fax: +84 (8) 3822 5172
Email: enquiries@bbgv.org
Mobile
According to Vietnam
Telecommunications Authority (VNTA)
- Ministry of Information and
Communication (MIC), the number of
mobile subscribers nationwide was
120.3 million(28) in 2015. According to
World Bank and National Institute of
Information and Communications
Strategy (NIICS) at the end of 2015, the
mobile subscriptions per 100 people in
Vietnam was 131(29) and the number of
3G subscribers was 35.78 million(30),
respectively.
Vietnam has delayed 4G licensing until
2017 and the rollout of trial 4G services
has been limited to selected cities due
to the low quality of the 3G network.
Wireless technology is developing as
an important platform for fixed
broadband services due to the weak
and unreliable fixed-line infrastructure.
Source: BMI Research, Vietnam Telecommunications
Report Q1 2016
HANOI OFFICE
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Tel: +84 (4) 3633 0244
Wireline Voice & Broadband
Due to former monopoly status as a
State-owned entity and its continued
investment to expand its national
fixed-line infrastructure, the Vietnam
Posts and Telecommunications Group
(VNPT) remains the dominant operator
in spite of the large number of
operators in the sector and the rising
competition encouraged by the MIC.
According to World Bank, Vietnams
fixed broadband subscriptions (per 100
people) in 2015 was 8.14(31). The
country has a plan in place to boost
nationwide broadband coverage by
2020. The objective is to reach 90%(32)
by 2015 and 100%(33) by 2020.
Pay TV
State-owned Vietnam Television
(VTV)s brands VCTV, Saigontourist
Cable Television Company (SCTV) and
K+ held more than 70%(34) of the
market.
The Vietnamese pay TV market has
seen strong competition in the past
two years. According to the Ministry of
Information and Communications, as
of the end of 2015, there were 31(35)
providers on the market, using four
different technologies, namely cable
TV (including IPTV), digital terrestrial
television, satellite television, and
mobile television.
The number of pay TV subscribers is
about 9.9 million(36), of which cable TV
subscribers account for 80.8 per
cent(37). The total revenue of pay TV
providers in 2015 was VND 9.624
trillion ($431.5 million)(38) .
5
 TELECOMMUNICATIONS
Strengths
Highly competitive mobile sector
Fixed-line penetration levels and internet user rates are
high in major urban centres such as Ho Chi Minh City,
Hanoi, Danang and Haiphong.
Weaknesses
Dependency on prepaid services exerts strong downward
pressures on average revenue per user (ARPU) levels.
Broadband growth continues to be highly dependent on
digital subscriber line (DSL), considered to be an old-
fashioned transmission technology compared to fiber and
satellite.
Digital divide: many rural areas have little or no access to
telecommunications services despite advanced networks
being rolled out in larger cities.
Source: BMI Research, Vietnam Telecommunications Report Q1 2016
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BRITISH BUSINESS GROUP VIETNAM (BBGV)
HO CHI MINH CITY OFFICE
G/F, 25 Le Duan Boulevard, District 1, Ho Chi Minh City
Tel: +84 (8) 3829 8430; Fax: +84 (8) 3822 5172
Email: enquiries@bbgv.org
Opportunities
Government approach to liberalise the telecoms industry
could see the entrance of more foreign investors.
Divestiture of MobiFone from Viet Nam Posts and
Telecommunications (VNPT), and the former's subsequent
planned Initial Public Offering (IPO) by 2016 could provide the
impetus for operators to launch better quality services.
Threats
Geographical challenges to network deployments; nearly one-
third of Vietnam's villages lie in mountainous areas without
access to telecommunications services. The total number of
inactive mobile subscribers is unknown in the market that
lacks transparency and reliable data.
The Ministry of Information and Communication (MIC) will
hold off 4G licensing until 2017; delayed introduction of 4G
could cause Vietnam to trail behind its peers.
Source: BMI Research, Vietnam Telecommunications Report
Q1 2016
Source: BMI Research, Vietnam Telecommunications Report Q1 2016
HANOI OFFICE
193B Ba Trieu Street, Hai Ba Trung District, Hanoi 6
Tel: +84 (4) 3633 0244
 SOURCE OF INFORMATION
(1), (2), (3) International Telecommunication Union, 2015.
Global ICT Development Index 2015. [online] Available at:
http://www.itu.int/net4/ITU-
D/idi/2015/index.html#idi2015countrycard-tab&VNM
(4), (5) World Economic Forum, 2015. Global Information
Technology Report 2015, Vietnam. [online] Available at:
http://reports.weforum.org/global-information-technology-
report-2015/economies/#economy=VNM
(6), (7), (8) Cushman & Wakefield, 2015. Where In The
World? Business Process Outsourcing and Shared Service
Location Index, p. 17. Available at:
http://www.cushmanwakefield.com/en/research-and-
insight/2015/business-process-outsourcing-location-index-
2015/
(9), (10) Tholons, 2016. Top 100 Outsourcing Destinations
Rankings & Executive Summary, p. 2. [online] Available at:
http://www.tholons.com/TholonsTop100/pdf/Tholons_Top_
100_2016_Executive_Summary_and_Rankings.pdf
(11), (12), (13) BMI Research, 2016. Vietnam Information
Technology Report Q1 2016. Market Overview, Hardware, p.
27.
(14) BMI Research, 2016. Vietnam Information Technology
Report Q1 2016. Market Overview, Hardware, p. 22.
(15), (16) BMI Research, 2016. Vietnam Information
Technology Report Q1 2016. Market Overview, Hardware, p.
23.
(17) BMI Research, 2016. Vietnam Information Technology
Report Q1 2016. Market Overview, Hardware, p. 24.
(18), (19), (20) BMI Research, 2016. Vietnam Information
Technology Report Q1 2016. Market Overview, Software, p.
28.
(21) BMI Research, 2016. Vietnam Information Technology
Report Q1 2016. Market Overview, Services, p. 42.
To find out more about our services,
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BRITISH BUSINESS GROUP VIETNAM (BBGV)
HO CHI MINH CITY OFFICE
G/F, 25 Le Duan Boulevard, District 1, Ho Chi Minh City
Tel: +84 (8) 3829 8430; Fax: +84 (8) 3822 5172
Email: enquiries@bbgv.org
(22) BMI Research, 2016. Vietnam Information Technology
Report Q1 2016. Market Overview, Cloud Computing, p. 35.
(23), (24) Viet Nam News, 2016. Telecom Firms Net USD 15 b in
2015. [online] Available at:
http://vietnamnews.vn/economy/280707/telecom-firms-net-
15b-in-2015.html#WC22E4GWiQw5qyRf.97
(25), (26), (27) Vietnam Breaking News, 2016. Vietnam Phone
firms top ASEAN list. [online] Available at:
https://www.vietnambreakingnews.com/2016/04/vietnam-
phone-firms-top-asean-list/
(28) Vietnam Telecommunications Authority, 2016. Statistics
Database. [online] Available at:
http://vnta.gov.vn/thongke/Trang/dulieuthongke.aspx#
(29) World Bank, 2015. Mobile Cellular Subscriptions (per 100
people), Vietnam. [online] Available at:
http://data.worldbank.org/indicator/IT.CEL.SETS.P2?locations=
VN
(30) National Institute of Information and Communications
Strategy, 2016. ICT Indicators Statistics in Vietnam Overview
Report, p. 2. Available at:
http://www.itu.int/en/ITU-D/Regional-
Presence/AsiaPacific/Documents/Events/2016/Mar-
ICTStats/Presentations/ICT%20Indicators%20Statistics%20in%
20Vietnam.pptx
(31) World Bank, 2015. Fixed Broadband Subscriptions
Subscriptions (per 100 people), Vietnam. [online] Available at:
http://data.worldbank.org/indicator/IT.NET.BBND.P2?location
s=VN
(32), (33) BMI Research, 2016. Vietnam Telecommunications
Report Q1 2016. Market Overview, Wireline Voice &
Broadband, p. 29.
(34) BMI Research, 2016. Vietnam Telecommunications Report
Q1 2016. Market Overview, Pay TV, p. 29.
(35), (36), (37), (38) Vietnamnet Bridge, 2016. Two Major Cable
TV Provides To Go Public. [online] Available at:
http://english.vietnamnet.vn/fms/science-it/151768/two-
major-cable-tv-providers-to-go-public.html
HANOI OFFICE
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