ICT sector in Vietnam

An Expert's View about IT and Telecommunications in Vietnam

Posted on: 6 Feb 2013

Over the past decade, the Vietnam ICT industry has recorded an average growth rate of 20-25%. Over the past 5 years, Vietnam has sustained an average network growth of over 20%.

Monday, 07 Jan 2013 Over the past decade, the Vietnam ICT industry has recorded an average growth rate of 20- 25%. Over the past 5 years, Vietnam has sustained an average network growth of over 20%, which is the highest in the region ICT sector in Vietnam After being listed by ITU (International Telecommunication Union) among the countries with the highest telecommunication growth rate worldwide in the last few years, the telecommunication sector in Vietnam was hit by the country’s difficult economic situation in 2011. As a result, for the first time in many years, the total telecommunication revenue went down considerably to US$7 billion, a 26% decrease compared to 2010. Market overview Compared with figures of 2010, the number of mobile phone subscribers rose by 14% while the number of internet users went up 14.2%, reflecting the saturation of the market. However, the market witnessed an explosion in the number of 3G subscribers to above 16 million by the end of 2011, giving more opportunities for value added services. On the contrary, the IT industry proved to be a significant sector with a total turnover of US$13.5 billion, a remarkable increase of 79% compared to that of 2010. In terms of software industry, Vietnam is becoming a new centre for software outsourcing. Vietnam ranked no. 8 in the top 50 attractive software outsourcing destinations by A.T.Kearney in 2011 (two steps upward compared to 2009). Ho Chi Minh City and Hanoi ranked No.17 and 21 respectively on Tholons Global Services’ 2012 list of top 100 attractive software outsourcing cities. Today, some international giants such as Samsung, Nokia and Intel have set up their manufacturing sites in Vietnam. Intel invested US$1 billion to build their largest manufacturing site worldwide in Ho Chi Minh City which came into operation in July 2010. ICT is seen by Vietnam’s Government as a crucial sector for the country’s economy and has been given many incentives to promote the sector. A newly passed Telecommunication Law opens up the market to all economic sectors. After being listed by ITU (International Telecommunication Union) among the countries with the highest telecommunication growth rate worldwide in the last few years, the telecommunication sector in Vietnam was hit by the country’s difficult economic situation in 2011. As a result, for the first time in many years, the total telecommunication revenue went down considerably to US$7 billion, a 26% decrease compared to 2010. Compared with figures of 2010, the number of mobile phone subscribers rose by 14% while the number of internet users went up 14.2%, reflecting the saturation of the market. However, the market witnessed an explosion in the number of 3G subscribers to above 16 million by the end of 2011, giving more opportunities for value added services. On the contrary, the IT industry proved to be a significant sector with a total turnover of US$13.5 billion, a remarkable increase of 79% compared to that of 2010. In terms of software industry, Vietnam is becoming a new centre for software outsourcing. Vietnam ranked no. 8 in the top 50 attractive software outsourcing destinations by A.T.Kearney in 2011 (two steps upward compared to 2009). Ho Chi Minh City and Hanoi ranked No.17 and 21 respectively on Tholons Global Services’ 2012 list of top 100 attractive software outsourcing cities. Today, some international giants such as Samsung, Nokia and Intel have set up their manufacturing sites in Vietnam. Intel invested US$1 billion to build their largest manufacturing site worldwide in Ho Chi Minh City which came into operation in July 2010. ICT is seen by Vietnam’s Government as a crucial sector for the country’s economy and has been given many incentives to promote the sector. A newly passed Telecommunication Law opens up the market to all economic sectors. The Information and Communications Technologies (ICT) industry in Vietnam is among the fastest growing sectors in the country. Over the past decade, the Vietnam ICT industry has recorded an average growth rate of 20-25%. Over the past 5 years, Vietnam has sustained an average network growth of over 20%, which is the highest in the region. However, due to the country’s difficult economic situation in 2011, there was a slowdown in the very high growth rate of the telecommunication sub-sector.The total turnover from this sub-sector went down from US$9.4 billion in 2010 to US$7 billion in 2011. As of December 2011, Vietnam had approximately 137.5 million telephone subscribers, including 10.2 million landline and 127.3 million mobile phone subscribers. (Source: Vietnam ICT Whitebook 2012). The number of mobile phone subscribers increased by 14%, reflecting the saturation of the market. On 13 August 2009, four licenses for third-generation (3G) services were officially awarded to Viettel, Mobifone, Vinaphone and the joint venture of EVN Telecom and Hanoi Telecom. By the end of 2010, these mobile operators have introduced 3G services into the market. In 2011, the number of 3G subscribers soared to 16 million, accounting for more than 80% of the total number of broadband subscribers. This opens to more opportunities for value added services. The Internet was officially introduced to Vietnam in late 1997. The sector has developed rapidly in the last few years partly because of the availability of affordable broadband/ADSL packages for households (the monthly subscription average rate is as low as US$3). In 2011, Vietnam ranked 6th of Asia top internet countries with 3.1 million users (35.7% of the population). Despite the country difficult economic situation in 2011, the IT industry in Vietnam continued to play an important role by contributing US$13 billion in revenue, increased by 79 % compared to 2010. This is mainly thanks to the US$11.3 billion in revenue brought about by the hardware sector, representing 82% of the total revenue of the IT industry, an increase of 101% compared to 2010. Both the software industry and digital content industry continued to grow but at a lower speed of 10% and 25% respectively. The digital content industry’s revenue comes mainly from value added services and online games. In general, the monopoly of state corporations in the ICT sector is gradually giving way to competition. Entry to the World Trade Organisation (WTO) in January 2007 provided the industry with more private competition, which has led to an increase in the number of actors in the market, and made telecommunications and technology services cheaper and more accessible Key opportunities ξ The National Strategy on Transforming Vietnam into an advanced ICT country by 2020. In terms of ICT human resources, the strategy aims to increase the total number of people working in ICT industry to one million. In terms of infrastructure, the strategy looks at expanding broadband coverage to the most remote villages and mobile broadband coverage to 95% of the population as well as ensuring 70% of the population has internet access. In terms of ICT industry development, the strategy targets at forming advanced ICT R&D institutions and bringing Vietnam to the top 10 list of countries providing outsourcing services and digital content services. In view of this national strategy, international co-operation in this field is promoted and there will be more projects on improving ICT infrastructure and usage in the public sector. ξ Digital Content Industry. While being affected by the economic slow down in Vietnam, the digital content industry still achieved a turnover of US$1.16 billion in 2011, recording a year on year growth rate of 25%. Although digital content is a new industry in Vietnam, it is expected to be on the list of key industries by the end of 2015 with a revenue of US$2 billion. The introduction of 3G in the past 2 years has laid a solid ground for the growth of digital content services, especially mobile content services. ξ Data Centre Services. Although data centre has only been introduced to the market in the last couple of years, many major ICT companies have invested in datacentres to meet the increasing demand of the local market. The capital expenditure for a commercial datacetre in Vietnam was expected to reach US$244 million by end of 2011. Companies such as FPT, Viettel, CMC, etc. have actively played their parts in this promising sub-sector. Furthermore, there is a chance for Vietnam to become another major destination for data centre services now that the leading data centres in Japan, Australia, Singapore, Hong Kong, etc. struggle to meet the increasing demand. Therefore, giant data centre service providers such as KDDI, NTT Telecommunications, etc. have approached local data centre service providers for business co-operation. ξ Cloud Computing. Vietnam has been approaching cloud computing services through some projects from Microsoft, Intel, etc. This was marked by the signing of an MOU in May 2010 between FPT and Microsoft Asia Pacific for bilateral cooperation to promote cloud computing development in Vietnam. In another development, VNG, a local company, was sponsored by the US Trade and Development Agency to the tune of VND 8.5 billion for the implementation of cloud computing at the former’s Vinadata centre. Results of a recent survey by Symantec show that cloud computing is more and more popular in Vietnam and 46% of local enterprises and organisations are implementing hybrid cloud. ξ E-commerce. With 31.95% of the country’s population using the internet and significant improvements in the banking system, Vietnam is considered a potential market for e-commerce. Local e-commerce trading floors are also positive about the prospect of e-commerce in Vietnam. The total value of Vietnam’s e-commerce was only US$100 million but is expected to grow to US$ 2 billion by end of 2015. ξ ICT applications in Healthcare sector. In terms of ICT adoption in the healthcare sector, Vietnam is still at the very low level compared to the average world-wide level. However, with the population of 89 million, more than 70% of which live in the rural areas, Vietnam is committed to intensifying ICT adoption in the healthcare sector. Therefore, Vietnam, in experts’ view, is a potential market for ICT applications used for the healthcare sector. The introduction of 3G is, again, a step forward in preparing the infrastructure. This potential market is considered a playing field for foreign players with the local companies acting as partners/ distributors. Companies such as Cisco, IBM or Ericssion have been very active in watching for new developments in this market. ξ ICT applications in Transport sector UKTI’s report namely Smart Cities of The Future in Asia has identified ICT applications in the transport sector as an area of opportunity. Intelligent transport systems, automatic e- ticketing systems, smart parking systems, etc are necessry for the current development of the transport system in Vietnam. Currently Ho Chi Minh City is in the very first stage of building its metro system. The first line is expected to be operational by 2015. In this context, there is a need for rail management systems, journey planners and IT infrastructure in stations and trains. Latest export opportunities – ICT Latest export opportunities - Vietnam Getting into the market Good local partner It is important that UK companies can find a good local partner to make use of their local knowledge, especially on local business practice as well as their network of contacts. Long-term commitment Vietnam is not a quick-win market, therefore, UK companies should be patient and make long-term commitment in order to explore and succeed in this market More about doing business in Vietnam
Posted: 06 February 2013

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