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It viet ic tmarketforecastanalysis_2013_finalver

  1. 1. MARKET ANALYSIS Vietnam Information and Communication Technology Market 2009–2013 Forecast and Analysis Bao-Chau Nguyen Hoang-Thai Nguyen Lam Nguyen IDC OPINION Vietnams economy has been unfavorable in 2009, even worse than in 2008. Despite pessimistic forecasts as well as reduced investments from the foreign and local private sectors, the total information and communication technology (ICT) spending is expected to increase to US$3.5 billion while the telecommunications service spending will reach US$8.3 billion by 2013. The Vietnam ICT market will garner more attention -5P.84 8 812 0061 from the government, especially by 2010 when the economy is expected to increase in terms of capacity and accelerate by 2012, before going back to the normal by 2013. Key findings of this study include:  IDC forecasts that the Vietnam IT service revenue will reach US$383.8 million,Suite 2.6B, E-Town 364 Cong Hoa Street Tan Binh District Ho Chi Minh City, Vietnam accounting for a 10.9% share of the total spending and posting a 17.1% growth rate by 2013. The market will post a high compound annual growth rate (CAGR), thanks to an impressive growth rate of more than 18% from 2009 to 2010.  The total hardware spending is expected to reach US$3 billion by 2013, accounting for roughly 84.1% of the total ICT spending and posting a 9.7% CAGR, the lowest among the ICT segments, due to a sharp decline in growth (around 6% of the total investment year over year [YoY]) in 2009 when Vietnam was affected by the economic downturn.  The telecom services segment will be appealing to most ICT enterprises in Vietnam from 2009 to 2013 with the emergence of new fixed-line (e.g., EVN Telecom) and wireless SPs (e.g., HT Mobile and e-mobile). The Vietnam telecom market is not expected to suffer from the global depression, posting revenue of US$8.3 by 2013 and a 14.3% CAGR, the highest among the countries in Southeast Asia.  In order to consolidate the economy, the government introduced its second stimulus plan package worth US$8 billion to support the private sector and the urban economy. However, feedback indicates that IT vendors have little interest since there was hardly any ICT investment in the stimulus plan package. Filing Information: October 2009, IDC #VN380101S, Volume: 1 Vietnam: ICT Market Forecast and Analysis 2007-2011: Market Analysis
  2. 2. TABLE OF CONTENTS PIn This Study 1Methodology ............................................................................................................................................. 1Executive Summary.................................................................................................................................. 2S i t u a t i o n O ve r vi ew 2Overall Information and Communication Technology Market ................................................................... 2 Market Drivers ................................................................................................................................... 2 Market Inhibitors ................................................................................................................................ 3IT Market .................................................................................................................................................. 6 Market Overview................................................................................................................................ 6 Market Segments .............................................................................................................................. 7 By Industry ................................................................................................................................. 7 IT Market by Product Type ......................................................................................................... 10 Hardware ........................................................................................................................................... 11 Systems...................................................................................................................................... 12 Networking Equipment ............................................................................................................... 17 Packaged Software ........................................................................................................................... 19 IT Services......................................................................................................................................... 20Telecommunications Services Market ...................................................................................................... 21 Market Overview................................................................................................................................ 21 Telecommunications Services Market by Segment ........................................................................... 22 Fixed-Line Telecommunications Services ......................................................................................... 24 Wireless Telecommunications Services ............................................................................................ 27 Major Wireless Telecommunications Service Vendors............................................................... 29Future Outlook 31Forecast and Assumptions ....................................................................................................................... 31 Overall Market ................................................................................................................................... 31 IT Market Forecast ............................................................................................................................ 40 IT Market by Product Type ................................................................................................................ 46 Hardware.................................................................................................................................... 48 Packaged Software .................................................................................................................... 57 IT Services ................................................................................................................................. 59 Overall Telecommunications Services Market................................................................................... 62 Telecommunications Services Market Forecast ......................................................................... 62 Fixed-Line Telecommunications Services ......................................................................................... 65 Wireless Telecommunications Services ............................................................................................ 67Market Context ......................................................................................................................................... 69Essential Guidance 70Learn More 71Related Research ..................................................................................................................................... 71Definitions ................................................................................................................................................. 72 PCs.................................................................................................................................................... 72 Desktop PCs .............................................................................................................................. 72#VN380101S ©2009 IDC
  3. 3. TABLE OF CONTENTS — Continued P Portable PCs .............................................................................................................................. 72 Servers .............................................................................................................................................. 73 Packaged Software ........................................................................................................................... 73 IT Services......................................................................................................................................... 73 Telecommunications Services ........................................................................................................... 73©2009 IDC #VN380101S
  4. 4. LIST OF TABLES P 1 Vietnam Economic Stimulus Package Plan, 2009........................................................................ 6 2 Vietnams Key Industry Trends, 2009........................................................................................... 8 3 Vietnam Top PC Vendor Temperature Readings, 2009 ............................................................... 16 4 Vietnam Wireless SPs, 2006........................................................................................................ 30 5 Key Forecast Assumptions for Vietnam Information and Communication Technology, 2009–2013 ................................................................................................................................... 31 6 Vietnam IT Spending Forecast, 2009–2013 (US$M).................................................................... 41 7 Vietnam IT Spending Share Forecast, 2009–2013 ...................................................................... 42 8 Vietnam IT Spending Growth Forecast, 2009–2013 .................................................................... 43 9 Asia/Pacific (Excluding Japan) IT Spending Forecast, 2008–2013 (US$M)................................. 44 10 Asia/Pacific (Excluding Japan) IT Spending Share Forecast, 2008–2013 ................................... 45 11 Asia/Pacific (Excluding Japan) IT Spending Growth Forecast, 2009–2013 ................................. 45 12 Vietnam IT Spending Forecast by Segment, 2008–2013 (US$M)................................................ 47 13 Vietnam IT Spending Share Forecast by Segment, 2008–2013 .................................................. 47 14 Vietnam IT Spending Growth Forecast by Segment, 2009–2013 ................................................ 47 15 Vietnam Hardware Spending Forecast, 2008–2013 (US$M) ....................................................... 49 16 Vietnam Hardware Spending Share Forecast, 2008–2013 .......................................................... 49 17 Vietnam Hardware Spending Growth Forecast, 2009–2013 ........................................................ 49 18 Vietnam Server Spending Forecast, 2008–2013 (US$M) ............................................................ 51 19 Vietnam Server Spending Share Forecast, 2008–2013 ............................................................... 51 20 Vietnam Server Spending Growth Forecast, 2009–2013 ............................................................. 51 21 Vietnam PC Shipment Forecast by Form Factor, 2008–2013 (Units) .......................................... 52 22 Vietnam PC Shipment Share Forecast, 2008–2013..................................................................... 52 23 Vietnam PC Growth Forecast by Form Factor, 2009–2013 ......................................................... 52 24 Vietnam Desktop PC Shipment Share Forecast, 2008–2013....................................................... 53 25 Vietnam Desktop PC Shipment Growth Forecast, 2009–2013..................................................... 53 26 Vietnam Portable PC Shipment Share Forecast, 2008–2013 ...................................................... 53 27 Vietnam Portable PC Shipment Growth Forecast, 2009–2013 .................................................... 54 28 Vietnam Networking Equipment Spending Forecast, 2008–2013 (US$M) ................................... 55 29 Vietnam Networking Equipment Spending Share Forecast, 2008–2013...................................... 55 30 Vietnam Networking Equipment Spending Growth Forecast, 2009–2013.................................... 55 31 Vietnam Router and Switch Spending Forecast, 2008–2013 (US$M).......................................... 56 32 Vietnam Router and Switch Spending Share Forecast, 2008–2013 ............................................ 56 33 Vietnam Router and Switch Spending Growth Forecast, 2009–2013 .......................................... 57 34 Vietnam Packaged Software Spending Forecast, 2008–2013 (US$M)........................................ 58 35 Vietnam Packaged Software Spending Share Forecast, 2008–2013........................................... 58#VN380101S ©2009 IDC
  5. 5. LIST OF TABLES — Continued P 36 Vietnam Packaged Software Spending Growth Forecast, 2009–2013......................................... 59 37 Vietnam IT Service Spending Forecast, 2008–2013 (US$M)....................................................... 60 38 Vietnam IT Service Spending Share Forecast, 2008–2013 ......................................................... 61 39 Vietnam IT Service Spending Growth Forecast, 2009–2013........................................................ 61 40 Vietnam Telecommunications Service Spending Forecast, 2008–2013 (US$M) ......................... 62 41 Vietnam Telecommunications Service Spending Share Forecast, 2008–2013 ............................ 63 42 Vietnam Telecommunications Service Spending Growth Forecast, 2009–2013 .......................... 63 43 Southeast Asia Telecommunications Services Spending Forecast, 2008–2013 (US$M) ............ 64 44 Southeast Asia Telecommunications Service Spending Share Forecast, 2008–2013 ................. 64 45 Southeast Asia Telecommunications Service Spending Growth Forecast, 2009–2013 ............... 65 46 Vietnam Fixed-Line Telecommunications Service Spending Forecast, 2008–2013 (US$M) ....... 66 47 Vietnam Fixed-Line Telecommunications Service Spending Share Forecast, 2008–2013 .......... 66 48 Vietnam Fixed-Line Telecommunications Service Spending Growth Forecast, 2009–2013 ........ 66 49 Vietnam Wireless Telecommunications Service Spending Forecast, 2008–2013 (US$M) .......... 68 50 Vietnam Wireless Telecommunications Service Spending Share Forecast, 2008–2013 ............. 68 51 Vietnam Wireless Telecommunications Service Spending Growth Forecast, 2009–2013 ........... 68 52 Vietnam 2007 and 2009 IT Spending Forecast Comparison, 2007–2013 (US$M)....................... 70©2009 IDC #VN380101S
  6. 6. LIST OF FIGURES P 1 Vietnam IT Spending by Industry, 2008 ....................................................................................... 5 2 Asia/Pacific (Excluding Japan) IT Spending Shares by Country, 2008 ........................................ 7 3 Vietnam IT Spending by Product Category, 2008 ........................................................................ 11 4 Vietnam Hardware Spending by Product Category, 2008 ............................................................ 12 5 Vietnam System Spending, 2008 ................................................................................................. 13 6 Vietnam PC Shipments by Form Factor, 2008 ............................................................................. 14 7 Vietnam PC Shipments by Segment, 2008 .................................................................................. 15 8 Vietnam Server Spending, 2008 .................................................................................................. 17 9 Vietnam Networking Equipment Spending by Form Factor, 2008................................................ 18 10 Vietnam Router and Switch Spending by Form Factor, 2008....................................................... 19 11 Vietnam Software Spending by Product Type, 2008.................................................................... 20 12 Vietnam IT Service Spending by Product Type, 2008.................................................................. 21 13 Southeast Asia Telecommunications Services Spending, 2008................................................... 22 14 Vietnam Telecommunications Service Spending by Product Type, 2008 .................................... 23 15 Vietnam Telecommunications Services Spending by Segment, 2008 ......................................... 24 16 Vietnam Fixed-Line Telecommunications Services Spending by Segment, 2008 and 2013........ 25 17 Vietnam Fixed-Line Telecommunications Services Spending by Segment, 2008........................ 26 18 Vietnam Fixed-Line Telecommunications Service Subscribers, 2008.......................................... 27 19 Vietnam Wireless Telecommunications Services Spending by Segment, 2008 and 2013........... 28 20 Vietnam Wireless Telecommunications Services Spending by Segment, 2008........................... 29 21 Vietnam Wireless Telecommunications Service Vendor Shares, 2008 ........................................ 30 22 Vietnam IT Spending Forecast, 2009–2013 ................................................................................. 41 23 Vietnam IT Spending Forecast by Product Type, 2008–2013 ...................................................... 46 24 Vietnam Hardware Spending Forecast by Product Type, 2008–2013.......................................... 48 25 Vietnam Server Spending Forecast, 2008–2013.......................................................................... 50 26 Vietnam Networking Equipment Spending Forecast, 2008–2013 ................................................ 54 27 Vietnam Router and Switch Spending Forecast, 2008–2013 ....................................................... 56 28 Vietnam Packaged Software Spending Forecast, 2008–2013 ..................................................... 58 29 Vietnam IT Service Spending Forecast, 2008–2013 .................................................................... 60 30 Vietnam Telecommunications Service Spending Forecast, 2008–2013 ...................................... 62 31 Vietnam Fixed-Line Telecommunications Service Spending Forecast, 2008–2013..................... 65 32 Vietnam Wireless Telecommunications Service Spending Forecast, 2008–2013........................ 67 33 Vietnam 2007 and 2009 IT Spending Forecast Comparison, 2007–2013.................................... 70#VN380101S ©2009 IDC
  7. 7. IN THIS STUDYThis IDC study presents the market dynamics and development trends in the VietnamICT market in the midst of the recent global economic crisis. It provides data on themarkets size in 2008 and five-year forecasts from 2009 to 2013. The key marketdrivers and inhibitors that are likely to have a strong impact on the marketsdevelopment over the next five years are also analyzed in this study.MethodologyThis study is a result of continuous efforts by IDCs research teams in Vietnam,Asia/Pacific (excluding Japan) or APEJ, and the United States. Its research strategyincorporates information from the following four different but interrelated sources: IDCs ICT market trackers. IDC tracks a broad range of ICT markets, including software, services, hardware, and telecom services. These tracker programs conduct extensive field research in different regions and industries in which key ICT vendors and their channel partners are interviewed. The findings are later processed using IDCs research models that incorporate worldwide research intelligence accumulated over the years. IDCs demand-side research. This includes thousands of interviews annually. It provides a powerful perspective on the demand side as well as an assessment of the competitive environment. IDCs user strategy databases (DBs) offer a compelling and consistent time-series view of industry trends and developments. Direct conversations with decision makers for IT purchasing activities in all industries provide an invaluable complement to the broader survey-based results. Vendor interviews and financial statements. Although many ICT vendors limit their financial disclosure, information from publicly listed companies provide a significant benchmark to assess private held companies. In addition, some companies also make financial disclosures to IDC during face-to-face briefings or interview sessions. IDC maintains an extensive library of financial and corporate information focusing on the ICT industry. IDC further maintains detailed revenue area models on more than 1,100 vendors worldwide. Other publicly available information. IDC research teams also conduct extensive secondary research using various sources, including officially published government statistics; yearbooks; information published by trade magazines, newspapers, Web sites, and other media; and information from trade shows, industry seminars, exhibits, and vendors new product and technology briefings.Ultimately, however, the information presented in this study represents IDCs bestestimates based on the above-mentioned sources and further data modeling that webelieve to be true to fill in any information gap.Note: All numbers in this document may not be exact due to rounding.©2009 IDC #VN380101S 1
  8. 8. Executive SummaryIDC believes the total ICT spending in Vietnam will reach US$3.5 billion while that ontelecom services will reach US$8.3 billion by 2013. The Vietnam IT market revenuereached US$2.1 billion in 2008, accounting for 1.2% of the APEJ market and willreach US$3.5 billion by 2013 at a 2009–2013 CAGR of 10.5%. The Vietnam ITmarket will expand its APEJ market share to 1.3% by 2013.The Vietnam telecom services market revenue will reach US$8.3 billion by 2013 at a20092013 CAGR of 14.3%, close to the CAGRs of Indonesia and Malaysia. TheVietnam telecom services market will expand its Southeast Asia market share from13.8% in 2008 to 19.5% by 2013.Over the next five years, IDC expects a more mature demand composition in theVietnam IT market. While the hardware segment will pose a 20092013 CAGR of9.7%, the software segment will only post a 20092013 CAGR of 11.7% while theservices segment will post a CAGR of 17.1%. By 2013, the services and softwaresegments will still only account for 16.2% and 18.3% shares of the overall Vietnam ITmarket, which are much lower than the shares of other mature IT markets.IDC expects the fixed-line telecom service spending in Vietnam to increase fromUS$1.2 billion in 2009 and US$24.7 billion by 2013 at a 20092013 CAGR of 15.6%.The wireless telecom service spending will increase from US$3.7 billion in 2009 toUS$75.3 billion by 2013 at a 20092013 CAGR of 13.9%.The stimulus package, economic recovery, hardware upgrades, 3G networkupgrades, and increased IT investments in key verticals will act as major marketdrivers. Increased inflation rate, weak execution of the governments national ITmaster plan, and a shortage in skilled labor will continue to inhibit the development ofthe Vietnam ICT market.SITUATION OVERVIEWOverall Information and CommunicationTechnology MarketAlthough Vietnam suffered from the global economic crisis like other countries, itsgross domestic product (GDP) rate still increased in 2008 to reach 6.2% though thiswas significantly below the expected 7.2% at the beginning of the year. The overallICT market continued to grow despite some inhibiting factors owing to the badeconomy. The IT market revenue grew from US$2.1 billion in 2008 to US$2.2 billionin 2009, posting an IT spending growth rate of 8.4% in 2009. The telecom servicerevenue reached US$4.2 billion in 2008 and US$5 billion in 2009, indicating aspending growth rate of 17.2%.Market Drivers The Vietnam governments US$8-billion stimulus package along with related local government infrastructure and social investments in various industries will2 #VN380101S ©2009 IDC
  9. 9. bring about business opportunities and advantages for the IT market in 2009 and push its growth forward by 2013. Although considered as one of the inhibitors of ICT growth, the current economic downturn can also bring about opportunities for industries in Vietnam. It will push companies and organizations to improve their business efficiency and expand their profit margins with the application of IT in business processes. The governments stimulus package also provides support programs and policies for domestic manufacturers to improve their competitive advantages in the retail market. Reforms in related sectors will bring about large IT purchasing opportunities in the telecom, healthcare, education, banking, and other industries. 3G investments in the telecom industry, new asymmetric DSL (ADSL) wireless services such as that offered by S-phone and code division multiple access (CDMA) SPs, and WiMAX deployment will lead to increased IT consumption in the next five years, especially in 2009 and 2010. Recent datacenter infrastructure buildouts penetrated some of the key services segments. Along with some new concepts such as cloud computing, software as a service (SaaS), and unified communications (UC), virtualization is also expected to generate more awareness and application in 2009. IBM considers Vietnam one of its most important markets, as the company recently established its Innovation Center in the country.Market Inhibitors The global financial crisis negatively impacted various industries in Vietnam such as manufacturing, financial services, and real estate. It slowed down the IT investment toward the end of 2008, which continued into 2009 despite the US$8- billion stimulus package introduced by the government in early 2009. The ICT spending growth rate has thus been adjusted to match the economic situation. Increased unemployment rate, resizing of the retail market, and income reduction have had a strong effect on consumers optimism with regard to the Vietnam economy since the end of 4Q08. These also affected the IT consumption and new electronic product upgrades. Lack of unity in planning and implementing policies and large government IT projects also ensued. Inherent challenges in ministerial planning and local provincial execution also resulted in delays in delivery and hindered accurate outcome measurement. Vietnam is also facing a shortage of highly skilled middle- and high-level management personnel. This contributed to low competitiveness of local companies, particularly state-owned enterprises. Legacy recruitment processes tended to favor Party members and inner circle candidates, overlooking the need for transparency in the market.The following are some of the major factors that IDC believes will drive the growth ofVietnams ICT market in the coming years:©2009 IDC #VN380101S 3
  10. 10.  Infrastructure projects. Infrastructure projects are expected to play an important role in Vietnams economy. They will help ease unemployment in 2009 and attract more foreign direct investments (FDIs) into Vietnam. For instance, Intel plans to manufacture 600 million chips each year with the help of its newly built factory and to improve the quality of its support services. Education reforms. The World Bank approved two loan packages for reforms in Vietnams education system and quality. These loans aim to improve the education infrastructure in universities and urban areas, especially with regard to IT upgrades. These will help schools apply new technologies in learning and teaching. Healthcare reforms. Healthcare services are also applying IT. Recently, some of the meetings of the Ministry of Health were hosted online. However, the healthcare industrys IT infrastructure is still lacking. As such, it is being considered as a potential market for IT investments focusing on projects to upgrade the systems of healthcare organizations. Improved human resource (HR) skills. The past few years saw strong improvements in HR training in the IT industry. Some private universities offered courses on enhancing peoples IT and soft skills (e.g., communication and leadership skills for employees).The banking and communications and media segments largely contributed to the ITspending. The government sector also focused more on pushing Vietnams IT rankingthrough the implementation of egovernment projects and expanding initiatives toinclude urban areas. The healthcare and resource industries segments posted thesmallest IT investments, as they continue to place more importance on the humanfactor over ISs (see Figure 1).4 #VN380101S ©2009 IDC
  11. 11. FIGURE 1Vietnam IT Spending by Industry, 2008 Banking 287.6 Communications and media 262.0 Construction 17.5 Consumer/Home 674.0 Discrete manufacturing 208.1 Education 109.1 Financial services 40.0 Government 220.5 Healthcare 16.2 Insurance 35.2 Process manufacturing 51.5 Resource industries 15.3 Retail 34.7 Services 71.9 Transportation services 31.6 Utilities 33.3 Wholesale 20.1 0 100 200 300 400 500 600 700 800 (US$M)n = US$2,128.7MSource: IDC Asia/Pacific Black Book, May 2009The global financial crisis urged the Vietnam government to seek out differentfinancial and economic efforts to minimize the negative impact. It initiated an US$8-billion stimulus package to aid the economy. This aimed to increase the household©2009 IDC #VN380101S 5
  12. 12. consumption and help businesses sustain their strong performance in 2009. Thestimulus package plan was divided into several parts as shown in Table 1. TABLE 1 Vietnam Economic Stimulus Package Plan, 2009 Item Description Budget Share (%) 1 Reduce business interest payments on bank loans 12.0 2 Increase advanced payments on public construction and infrastructure-related expenditure 2.3 3 Increase government funding to execute emergency economic spending 26.0 4 Transfer leftover investment budget from 2008 to 2009 21.1 5 Issue more government bonds 14.0 6 Expand further business tax reductions 19.5 7 Increase loan insurance for enterprises 11.8 8 Reduce the impact of the global economic crisis and assist social and employment benefits 5.0 Source: Vietnam Ministry of Planning and Investment, 2009IT MarketMarket OverviewThe Vietnam IT market revenue reached US$2.1 billion in 2008. Vietnam accountedfor 1.2% of the APEJ market revenue. The Peoples Republic of China (PRC) was thelargest revenue earner in the region with a share of 37.4% (about US$68.8 billion).Australia was the second strongest player, accounting for 15.7% of the overall APEJmarket share (about US$29 billion), followed by India with a share of 11.5% (aboutUS$21.1 billion), South Korea with 9% (about US$16.7 billion), and Indonesia with3.8% (about US$7.1 billion). Although it had a moderate share of the APEJ ICTmarket, Vietnam is expected to be one of the three fastest-growing ICT markets in theregion (see Figure 2).6 #VN380101S ©2009 IDC
  13. 13. FIGURE 2Asia/Pacific (Excluding Japan) IT Spending Shares by Country,2008 PRC 37.4 Australia 15.7 South Korea 2.9 India 11.5 Taiwan 3.8 Singapore 9.0 Hong Kong 3.1 Malaysia 2.3 Thailand 1.5 New Zealand 3.5 Indonesia 3.5 Philippines 3.0 Vietnam 1.2 ROAPEJ 1.6 0 5 10 15 20 25 30 35 40 (%)Source: IDC Asia/Pacific Black Book, May 2009Market SegmentsBy IndustryThe global financial crisis negatively affected Vietnams economy, the highest growthreductions in which occurred in the IT commercial and consumer segments. Thenoticeable drop in consumer purchasing made vendors queasy about the marketdemand thereby delaying decisions with regard to price reduction strategies in mostindustries. The financial services segment also suffered from fluctuating exchangerates and unpredictable gold prices. However, due to the support of the US$8-billionstimulus plan package, the financial services segment still posted a strong growthrate in terms of IT spending. The healthcare and education segments received thegreatest attention from the government (see Table 2).©2009 IDC #VN380101S 7
  14. 14. TABLE 2 Vietnams Key Industry Trends, 2009 Industry Trend #1 Trend #2 Consumer The current Internet user base in Vietnam will The global financial crisis will have a lead to an increase in digital content and significant impact on consumers purchasing induce demand for ecommerce. This will help behaviors and reduce their disposable companies further explore online commercial personal incomes. Consumers will have a activities. tendency to choose cheaper brands, require more selective shopping destinations, and looking for promotional activities. Financial services The IT adoption in the Vietnam banking Export-import businesses now process industry took off in the past few years. customs declaration forms online, thanks to According to the State Bank of Vietnam, more customs and tax SPs IT adoption. In early than 60% of their field employees receive IT 2009, tax codes mandated that personal training. In addition, 80% of their PCs have incomes be declared. By 2010, the Tax antivirus installed and 60% of banks have Department plans to provide tax payees tax- storage and disaster recovery (DR) systems filing, customer, payment, and enumeration set up. More than half of the total number of services online. financial SPs uses Internet banking, including home, SMS, and mobile banking. Government By 2010, 60% of all public information and The quality of IT labor forces will have a very government policies will be made accessible important role in technological development in online. In March 2009, the first the government sector. Along with this interdepartmental online conferencing was consideration, the 2020 Plan will include conducted. training 25,000 IT specialists by 2015, 50% of whom should satisfy regional standards and more than 53,000 IT executives from all industries. Distribution/Retail Vietnams World Trade Organization (WTO) eCommerce is considered a key factor in membership will push domestic developing the countrys economy although it retailers/distributors to face stiff competition has been encountering many restraints. There from giant international retailers such as are signs of advancement, however, thanks to Parkson, Big C, and Metro. Domestic the effort of some vendors (e.g., Viettels businesses were encouraged to join the online shopping services launched in market playground and work with one another September 2008, the cooperation between as well as invest in new IT systems to improve eBay and the Cho Dien Tu Web site product quality, maintain their positions in the (www.chodientu.vn) in June 2008). This will market, enhance their competitiveness, and provide an opportunity for Internet users to improve their management efficiency. benefit from ecommerce developments.8 #VN380101S ©2009 IDC
  15. 15. TABLE 2 Vietnams Key Industry Trends, 2009 Industry Trend #1 Trend #2 Education Education is key to the countrys eTraining is a new education trend in development. More attention on higher Vietnam. An announcement was released education and vocational training should be regarding the collaboration between the accorded. A five-year project to improve Ministry of Education and Training (MOET) higher education in Vietnam was introduced in and Intel to deploy the Electronic Education January 2007 worth US$120 million, US$108 Program in April 2009. Intel and its partners million of which came from the World Bank. will provide 1 million PCs worth US$220 each The Vietnam Vocational Education Support to teachers and students in the next two Project aimed to improve vocational schools years. capacity with a €440,000 funding provided by the Germany government for the first phase and €5 million provided by the Vietnam government for the second phase. The Vietnam government also encouraged the private sector to exert more effort to develop the countrys vocational training. Bigger IT investments are hence expected. Media and Online games will emerge as a potential The advertising industry spontaneously entertainment market segment that can quickly create developed. There are more than 3,000 phenomenal investment. At present, the advertising firms, 80 radio and television Vietnam online gaming market is dominated broadcasting stations, and 500 press by games from South Korea and the PRC. agencies in the country. However, 80% of the However, the Vietnam Software Association total profit still fall into the hands of foreign predicts that there will be at least 87 local companies despite foreign ownership online gaming companies by 2010, posting a limitations in the advertising segment 70% annual growth rate in terms of quantity. mandated by the Ministry of Culture and Twenty-five percent of the total online gaming Information. The online advertising revenue market revenue (US$83 million) in Vietnam reached US$2.8 million and is expected to will come from domestic online game SPs. reach US$7.8 million by 2010. Of the over US$410 million Internet spending annually, it is clear that online advertising receives low investment. Healthcare A nationwide electronic public healthcare Although there have been IT deployments in program will be launched to update the healthcare segment, it is still facing many information, promote IT usage, raise the problems with regard to infrastructure, segments capacity, and carry out application software, and application ability. administrative reforms. Intel, which is The Ministry of Health launched an electronic responsible for IT support will work with the healthcare program in collaboration with Ministry of Health and other ministries to use VNPT and Intel in March 2009. Intel, VNPT, IT to provide local public healthcare services. and their partners will provide US$599 million and 219 desktop PCs for this project. Telecom service training courses will also be offered to 1,000 public healthcare segment staff. This will strongly encourage IT usage in the healthcare industry.©2009 IDC #VN380101S 9
  16. 16. TABLE 2 Vietnams Key Industry Trends, 2009 Industry Trend #1 Trend #2 Manufacturing Consumer inquiries and industry requirements Enterprise resource management (ERM) is for quality and traceability will drive producers considered an innovative solution in internal to provide more details about their products. management in Vietnam and thus expected to Ensuring the quality of products prior to being gain acknowledgment, thanks to vendors exported, however, needs to be ensured by increased understanding of the market as well the government. Collaboration between the as multinational corporations (MNCs) Vietnam Association of Seafood Exporters adoption. Affordable pricing and cooperation and Producers (VASEP) and the State will be important factors in encouraging small Agency for Technological Innovation (SATI) and medium-sized businesses (SMBs) to will accelerate the adoption of traceability invest in the solution. Although the solution solutions to improve global food safety. As will face some challenges in the critical stage, part of a pilot project, IBM and FXA will it will remain highly regarded, as evidenced by collaborate with several local technology adoption trends in Vietnam. Service oriented companies in Vietnam to provide a system architecture (SOA) adoption in Vietnam will using radio frequency identification (RFID) remain in the nascent stages of adoption technology to track seafood exports, a market although it is already being widely used in worth more than US$4.3 billion in 2008. This many countries. initial strategy aims to track the origin of Vietnam seafood exports and help ensure their freshness upon arriving in various global markets. Source: IDC Vietnam, 2009IT Market by Product TypeIn 2008, the hardware spending comprised 87.1% of the total Vietnam IT spendingwhile IT services and packaged software together only accounted 8.2% (see Figure3). The packaged software spending made up about half of that spent on IT services.Compared with the IT spending of developed countries such as the United States, theservices and packaged software segment shares in Vietnam were much smaller,reiterating the immaturity of the Vietnam IT market.10 #VN380101S ©2009 IDC
  17. 17. FIGURE 3Vietnam IT Spending by Product Category, 2008 IT services (8.2%) Packaged software (4.7%) Hardware (87.1%) n = US$2,128.7MSource: IDC Asia/Pacific Black Book, May 2009Although the hardware spending share is much larger than those of IT services andpackaged software, its growth rate decreased around 0.4% YoY while those of othersegments increased by roughly 16.2% and 1.4%, respectively. This shows the ITmarkets potential in terms of future development.The trend also shows how much attention enterprises and the government are givingIT amid the economic downturn. The negative growth rate of the hardware segmentreflects the fact that most enterprises would rather invest in solutions and services toimprove their business rather than develop their IT infrastructure.The rapid growth of the IT services and packaged software segments also show thatend users have found a new way to take full advantage of the solutions with theirexisting systems rather than replace old with new systems amid the economic crisis.The demand for customized systems is also a major factor that can lead to the strongincrease in the IT service growth rate.HardwareThe hardware segment contributed 87.1% of the total IT spending to reach US$1,855million in 2008, US$1,141 million (61.5%) is spent on systems whereas only US$47.4million (2.6%) is spent on data storage devices (see Figure 4). Despite the modest ITspending investment, vendors focused more on developing storage devices, whichposted a 2.1% growth rate.©2009 IDC #VN380101S 11
  18. 18. FIGURE 4Vietnam Hardware Spending by Product Category, 2008 Peripherals (19.3%) Storage devices (2.6%) Networking equipment Systems (61.5%) (16.6%) n = US$1,855.4MSource: IDC Asia/Pacific Black Book, May 2009The system spendings growth rate fell 6% YoY. The peripheral segment posted astrong growth rate of 14.3%, thanks to the development of smart handheld devices(SHDs), which posted an increase of 28.3% YoY. Competition between SHDsuppliers and the release of 3G products also attracted more end users to thissegment.SystemsIn 2008, the total system spending reached US$1,141 million, 92.4% of which isspent on PCs (US$1,055 million). In contrast, the server spending only posted a 7.6%growth rate from US$86 million (see Figure 5).12 #VN380101S ©2009 IDC
  19. 19. FIGURE 5Vietnam System Spending, 2008 Servers (7.6%) PCs (92.4%) n = US$1,141.2MSource: IDC Asia/Pacific Black Book, May 2009In 2009, the PC segments growth rate decreased by 6% YoY while that of serversdecreased 4% YoY.PCsThe PC shipment increased by 1,509,025 units in 2008, of which desktop PCsaccounted 76.4% (1,153,021 units) while notebook PCs only accounted for 23.6%(356,004 units) (see Figure 6). This clearly shows how important desktop PCs are inVietnam. IDC believes the desktop PC segments share will be over 70% by the endof 2013.©2009 IDC #VN380101S 13
  20. 20. FIGURE 6Vietnam PC Shipments by Form Factor, 2008 Portable PCs (23.6%) Desktop PCs (76.4%) n = 1,509,025 unitsSource: IDC Vietnam PC Tracker, 1Q09Despite the low portable PC market share (23.6%) compared with desktop PCs, theformer will post a growth rate increase (1.6%) while the latters is expected to declineby around 0.9% due to unfavorable economic effects. Moreover, the young populationin Vietnam will move toward mobility due to PC vendor promotions, especially forportable PCs. The governments IT infrastructure investment and continuousintroduction of mininotebooks are some of the key factors that will lead to the highincrease in growth rate for portable PCs.In general, commercial PCs (56.5%) gained more market share compared withconsumer PCs (47.5%) in 2008. The gloomy economic situation is one of the factorsthat led to the decrease in the commercial PC segment as most of the investmentsfocused on taking full advantage of existing systems instead of building new orupgrading old ones. The bad economy not only led to a decrease in the commercialPC segment but also to the decrease in portable PC share.Although the commercial segment gained more market share than the consumersegment, the formers growth rate was still lower than the latters. Part of the reasonfor this was the fluctuating economy. However, vendors willingness to push thedemand from PC vendors did create increased need from the consumer PC segment,which posted a steady decline in PC prices and came up with attractive promotionsfor households.As shown in Figure 7, the commercial segment posted high demand for desktop PCs(56.5%) while consumers preferred to procure portable PCs (52.5%. In 2007, 65% ofthe commercial users preferred portable PCs in 2007. This percentage sharplydecreased to 47.5% in 2008. This means that the private sector will continue toupdate their systems but will more likely spend on desktop rather than portable PCsto try cutting down on expenses. On the other hand, PC vendors aggressive14 #VN380101S ©2009 IDC
  21. 21. promotions to convince the youth about the advantages of mobility did spur theincreased portable PC market share in the consumer segment.FIGURE 7Vietnam PC Shipments by Segment, 2008 Desktop PCs Consumer (43.5%) Commercial (56.5%) n = 1,153,021 units Portable PCs Commercial Consumer (47.5%) (52.5%) n = 356,004 unitsSource: IDC Vietnam PC Tracker, 1Q09According to IDC Vietnams 1Q09 PC tracker, there were not that many changes inthe PC vendors ranking. HP still took the leading position, thanks to appropriateprice-reduction strategies, especially in the portable PC segment. Acer still stayed insecond place with a high portable PC shipment and some reorganized distributionchannels. Dell took Lenovos third position, thanks to its high desktop PC shipment inthe commercial space. Problems in pushing its PCs in the commercial segmentcaused Lenovos share to decline. Following Lenovo, Asus and Toshiba maintained©2009 IDC #VN380101S 15
  22. 22. their ranking (i.e., fifth and sixth, respectively). Finally, Fujitsu and NEC reportedsignificantly reduced shipments, as neither seemed to have focused on developingtheir PC market shares in Vietnam. Sony recently joined the competition albeit withonly a few shipments. Table 3 shows the temperature readings of the top foreign PCvendors in Vietnam. TABLE 3 Vietnam Top PC Vendor Temperature Readings, 2009 Rating Vendor Comments Hot HP Stayed in first place. HP did well in both the desktop and portable PC markets, as its shipments steadily increased. It launched new products targeting a wide range of customers from the low- to the high-end segments. Good pricing policies and reputation for providing after-sales services and actively participating in corporate and industry events allowed it to continue doing well. Hot Acer Acer exhibited good growth in the portable PC market due to its affordable products. However, its desktop PC share continued to post only moderate growth. Unless it employs strategic plans to attract more consumers and commercial desktop PC customers, however, IDC believes it will continue to stay in second place. Warm Lenovo Lenovo posted stable shipments to Vietnam. Its new products (e.g., Thinkpad R61, T61, and X61 series), along with innovative features, helped it increase its sales. However, it still had difficulties with facing stiff competition with HP, Acer, and Dell. Warm Dell Dells desktop PC market continued to strongly grow while its portable PC market posted more moderate growth. Due to its brand, it has advantages in expanding its desktop PC market. However, IDC sees that it will maintain moderate growth in Vietnam due to its recent flat performance. Cool Toshiba Toshiba enjoyed moderate growth although it impressed users with Satellite A100. IDC sees that Toshiba will maintain the same growth rate in the coming quarters. Cool Fujitsu Japan businesses continued to be Fujitsus main customers. Due to its premium prices, its PC market remained limited. As the competition in the high-end segment heats up, it may be affected in the near future. Cool NEC NECs share continued to decline. IDC believes it should implement more marketing programs to boost its sales. Source: IDC Vietnam PC Tracker, 1Q09ServersThe server spending reached US$86.3 million in 2008 (see Figure 8). Volume serverscontinued to post the highest spending at 59.4% while high-end enterprise serversposted only 15%. Although volume servers posted the highest spending in 2008, itsshare has significantly declined from 2006 when its share was around 75.4%. High-end enterprise servers, on the other hand, nearly doubled their share from 2006(8.1%) to 2008 (15%). Midrange enterprise servers posted a stable market share ofaround 25.6% in 2008. This shows how aware enterprises with regard to making ITinvestments, especially amid a fluctuating economy. The more applications they usein their businesses, the more complicated IT systems they need. This is one of thereasons for the increased high-end enterprise server market share in 2008.16 #VN380101S ©2009 IDC
  23. 23. FIGURE 8Vietnam Server Spending, 2008 High-end enterprise servers (15.0%) Midrange Volume servers enterprise servers (59.4%) (25.6%) n = US$86.3MSource: IDC Asia/Pacific Black Book, May 2009The overall server market was expected to decline by 4.1% due to a bad economy.Despite a huge gain in market share in 2009, the high-end enterprise server shipmentwas 38.1% fewer than the previous year. Volume servers posted the same growthrate (7.6%) in 2009. This tendency reflected the consumption trends (i.e., opting forlow-priced alternatives) of organizations and enterprises amid the economic crisis.Networking EquipmentThe total Vietnam networking equipment spending reached US$308.7 million, 23.1%of which was spent on LAN hardware (about US$71.3 million) while 76.9% (aboutUS$237.4 million) was spent on other data communication equipment in 2008 (seeFigure 9).©2009 IDC #VN380101S 17
  24. 24. FIGURE 9Vietnam Networking Equipment Spending by Form Factor, 2008 LAN hardware (23.1%) Other data communications equipment (76.9%) n = US$308.7MSource: IDC Asia/Pacific Switch and Router Tracker, 4Q08The router and switch share increased by around 2.1% from 2006. This reflects thenetworking equipment markets stable growth, spurred by the smooth increase indemand. LAN hardware posted a 5.7% growth rate in 2009 to reach US$75.3 million.Routers and SwitchesIn general, the router and switch revenue reached US$71.3 million in 2008 (seeFigure 10). The router revenue specifically reached US$25.2 million (35.4% share)while the switch revenue reached US$46 million (64.6%) in 2008. This clearly showshow interested businesses are in using IT for their processes. Although the totalspending on these equipment has been increasing throughout the years, the routersegments growth rate still remained lower than that of switches, as SMBs and banksfocused on developing their networks using switches.18 #VN380101S ©2009 IDC
  25. 25. FIGURE 10Vietnam Router and Switch Spending by Form Factor, 2008 Routers (35.4%) Switches (64.6%) n = US$71.3MSource: IDC Asia/Pacific Switch and Router Tracker, 4Q08According to IDCs Switch and Router Tracker, the demand for routers and switchesat the end of 2008 significantly increased due to the completion of customsdepartments and the banking segments projects. This was also the reason why theswitch segments growth rate increased more sharply than that of routers.Despite the gloomy economic situation, the total router and switch spendingincreased by around 2.7% to reach US$73.2 million in 2009, thanks to somegovernment projects that hoped to upgrade systems in the education and healthcaresegments as well as deploy 3G networks in Vietnam.Packaged SoftwareThe packaged software spending reached US$99.1 million in 2008, most of whichcame from systems infrastructure software (about 47.4%) (see Figure 11). Theapplication software segments share was 31.3% while that of applicationdevelopment and deployment (AD&D) software segments was 21.3%. Despitehaving the lowest market share in the packaged software market, the AD&D softwaresegment recorded the highest spending (US$21.1 million) in 2008 compared with2006 (US$6.6 million).©2009 IDC #VN380101S 19
  26. 26. FIGURE 11Vietnam Software Spending by Product Type, 2008 Application software (31.3%) Systems infrastructure software (47.4%) AD&D software (21.3%) n = US$99.1MSource: IDC Asia/Pacific Black Book, May 2009After peaking in 2007, the packaged software spending suffered from a decline in2008 as a result of low demand for updates in the private sector. Hence, the totalpackaged software spending reached US$99.1 million, mostly due to hugeinvestments from the banking and telecom industries.IT ServicesThe IT service spending reached US$174.2 million in 2008, more than half of whichwas spent on implementation services (about 52.8%) (see Figure 12). Maintenanceand support services received more attention with an 18.3% share (around US$32million). This was followed by planning services in third place with an 11.3% sharevalued at US$19.7 million. Finally, the training and education and operation servicessegments recorded equal spending shares of 8.8% (around $15.3 million each).20 #VN380101S ©2009 IDC
  27. 27. FIGURE 12Vietnam IT Service Spending by Product Type, 2008 Training and Planning services education services (11.3%) (8.8%) Operation services (8.8%) Support services (18.3%) Implementation services (52.8%) n = US$174.2MSource: IDC Asia/Pacific Black Book, May 2009In 2009, IDC expects the IT service spending growth rate to reach around 16.2%, thehighest contribution in which will come from operation services (estimated growth rateof 20%). Following this trend, operation and education and training services followedin second place with growth rates of 19.3% and 19%, respectively. In spite of postingthe highest market share in 2009, the implementation services segment is expectedto post the lowest growth rate of only 13.9%. The IT service spending trends will stemfrom the governments stimulus package plan, which entailed huge operation andtraining and education service investments.Telecommunications Services MarketMarket OverviewThe Vietnam telecom services market has two subdivisions — fixed-line and wirelessservices. Each of these segments comprises two segments — data and voiceservices. The recent technological development and increased household incomesfrom 2007 to 2008 positively affected the telecom services market in Vietnam.Reduced prices and the entry of several mobile retailers and SPs turned the telecomservices market into a more attractive point of investment. These activities helpeddeter the effects of the global economic crisis on the Vietnam telecom servicesmarket, allowing it to post an impressive 34% growth rate in 2008.The Vietnam telecom services segment posted a 13.8% share (US$4.2 billion) of theSoutheast Asia telecom services market (see Figure 13). This was higher than thePhilippines share (13.1% or US$4 billion) in 2008. Indonesia posted the highest share(30.4% or US$9.4 billion) while Malaysia and Thailand ranked second and third withshares of 22.4% (around US$6.9 billion) and 20.3% (around US$6.2 billion),respectively.©2009 IDC #VN380101S 21
  28. 28. FIGURE 13Southeast Asia Telecommunications Services Spending, 2008 Indonesia 30.4 Malaysia 22.4 Thailand 20.3 Philippines 13.1 Vietnam 13.8 0 5 10 15 20 25 30 35 (%)Source: IDC ASEAN Fixed-Line Tracker and IDC Asia/Pacific Mobile Service Tracker, 2009Despite posting a moderate share of the Southeast Asia telecom services market,Vietnam posted a high growth rate, indicating a steady increase in the fixed-line andwireless services segments. If in 2007, Vietnam stayed behind other Southeast Asiacountries, in 2008, it passed the Philippines with a 13.8% growth rate, thanks togovernment projects. Moreover, the banking investment also helped increase thetelecom service spending in 2008.Telecommunications Services Market by SegmentBetween the two main telecom services segments, wireless services significantlyposted a high market share of 76.7% in 2008 valued at US$3.3 billion while fixed-lineservices only posted a 23.3% market share worth US$987.2 million (see Figure 14).This led to a total telecom service spending of US$4.2 billion. The Vietnam telecomservices market did not seem to be affected by the economic downturn at it posted a34% growth rate in 2008. This success was due to vendors aggressive promotionalactivities such as bundling prepaid phone cards and giving away free handyphones tocustomers who signed subscription contracts.22 #VN380101S ©2009 IDC
  29. 29. FIGURE 14Vietnam Telecommunications Service Spending by ProductType, 2008 Fixed-line services (23.3%) Wireless services (76.7%) n = US$4,233.1MSource: IDC ASEAN Fixed-Line Tracker and IDC Asia/Pacific Mobile Service Tracker, 2009The Vietnam telecom services market is expected to post a strong growth rate of17.2% in 2009 with a total spending of US$5 billion. The fixed-line services segmentgrew 20.1% while the wireless services segment grew 16.6%. This showed investorsinterest in exerting more effort to upgrade their fixed-line service offerings in 2009.The voice services segment accounted for a larger market share of 82.8% (or US$3.5billion) compared with data services (17.2% or US$729 million) (see Figure 15).©2009 IDC #VN380101S 23
  30. 30. FIGURE 15Vietnam Telecommunications Services Spending by Segment,2008 Data services (17.2%) Voice services (82.8%) n = US$4,233.1MSource: IDC ASEAN Fixed-Line Tracker and IDC Asia/Pacific Mobile Service Tracker, 2009Fixed-Line Telecommunications ServicesIn 2008, the total fixed-line telecom service spending reached US$987.2 million,posting a 30% growth rate even amid the global economic downturn (see Figure 15).IDC thus expects a steady increase in the fixed-line telecom service spending,allowing it to reach US$2 billion by 2013.24 #VN380101S ©2009 IDC
  31. 31. FIGURE 16Vietnam Fixed-Line Telecommunications Services Spending bySegment, 2008 and 2013 2008 2013 0 500 1,000 1,500 2,000 2,500 (US$M) Voice services Data servicesSource: IDC ASEAN Fixed-Line Tracker and IDC Asia/Pacific Mobile Service Tracker, 2009Voice services will continue to constitute a major chunk of the service spending with a66% share in 2008 while the data service spending will only account for a 34% share(see Figure 17). In 2008, the voice service revenue reached US$651.3 million, morethan twice the data service revenue. This shows that most people use telecomservices for voice communication compared with others. Due to developments in ITinfrastructure, the voice telecom service revenue is expected to reach US$1 billion by2013. With a 34% market share in 2008, the data services segments potentialincreased. It is expected to post a 49.6% market share by 2013 due to an increase inthe number of Internet access service subscribers.©2009 IDC #VN380101S 25
  32. 32. FIGURE 17Vietnam Fixed-Line Telecommunications Services Spending bySegment, 2008 Data services (34.0%) Voice services (66.0%) n = US$987.2MSource: IDC ASEAN Fixed-Line Tracker and IDC Asia/Pacific Mobile Service Tracker, 2009The fixed-line telecom service revenue is expected to reach US$1.2 billion in 2009,posting a 24% growth rate. The voice services market will maintain a stable growthrate of 18%. The data services segment posted a strong growth rate, increasing over30% in 2009 due mostly to Internet access services, which posted a 44% YoY growthrate. This was due to free gifts for new Internet access service subscribers such asfree modems, routers, and installation services.There were around 17.9 million telecom subscribers in Vietnam at the end of 2008.This reflected the increasing popularity of Internet access services in Vietnam. In2006, the proportion of Internet users to the total population was around 12 out of100. In 2008, this number nearly doubled to more than 20 out of 100 even thoughVietnams economy suffered from the economic downturn.The five major fixed-line telecom SPs in Vietnam will pose the following trends: VNPT. VNPT is the strongest fixed-line telecom SP in Vietnam with 12.4 million subscribers. As a state-owned entity, its most important competitive advantage lay in its monopoly of the market until the government opened it up in 1995. Even after that, it only had one competitor — Saigon Postel. VNPT successfully built its brand and established a wide range of loyal customers before other companies stepped into the market. Viettel. Although this player emerged in 2003 with the merger of two other Viettel companies established in 2002, it made a phenomenal entry when it became the second-best player in the telecom services market with 2.7 million subscribers in 2008. This was due to its launch of remarkably low-priced services. This strategy allowed it to survive and succeed even amid an unstable economy.26 #VN380101S ©2009 IDC
  33. 33.  EVN Telecom. EVN Telecom is a branch of Electricity Vietnam, which focuses on the telecom services market. EVN Telecom is the youngest telecom company in Vietnam though it gained quite a large market share with 2.2 million subscribers in 2008 to take third place. Its success stemmed from unique competitive advantages such as experience in providing basic services such as electricity. After all, Electricity Vietnam is the only company that provides electricity to the whole country. FPT. FPT was a successful supplier of IT software design services and distributor of IT equipment. It also explored other markets such as education and real estate. However, in the telecom services market, FPT did not seem to have had much success, as reflected by its 0.4 million subscribers in 2008, relegating it to only fourth place. This was due to challenges in procuring equipment from third parties. Saigon Postel. Considered one of the oldest telcos in Vietnam, Saigon Postel has not yet had much success with only 0.2 million subscribers due to a shortage in capital to expand its range of telecom services and products.FIGURE 18Vietnam Fixed-Line Telecommunications Service Subscribers,2008 VNPT 12.4 EVN Telecom 2.2 Viettel 2.7 FPT 0.4 Saigon Postel 0.2 0 2 4 6 8 10 12 14 (M)Source: IDC Vietnam and Vietnam Government Statistics, 2008Wireless Telecommunications ServicesThe Vietnam wireless telecom services market posted a strong growth rate (34%) in2008, translating to revenue of US$3.3 billion. This reflects the wireless service usagetrend in Vietnam as more and more subscribers opt to use mobile services. Alongwith increased fixed-line telecom usage, wireless services also obtained US$2.9©2009 IDC #VN380101S 27
  34. 34. billion spending for voice services, accounting for about 87.9% of the market, thanksto effective promotional programs and the entry of new mobile SPs (see Figure 19).Data services, on the other hand, only accounted for a 12.1% share in 2008,amounting to US$393.1 million, most of which came from SMS (around 7.7% valuedat US$250.5 million).FIGURE 19Vietnam Wireless Telecommunications Services Spending bySegment, 2008 and 2013 2008 2013 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 (M) Voice services Data servicesSource: IDC ASEAN Fixed-Line Tracker and IDC Asia/Pacific Mobile Service Tracker, 2009Similar to the fixed-line telecom services market, the wireless telecom servicesmarket did not seem to be affected by the economic downturn. As such, the wirelesstelecom services market revenue is expected to sharply increase by 2013 to reachUS$6.2 billion at a 13.9% CAGR. Despite its small market share, the data servicessegment strongly increased at a 26.1% CAGR to post revenue of US$1.3 billion by2013. Among the data services segments, wireless Internet access services areexpected to contribute US$493.8 million by 2013, posting a stable CAGR of 31.2%.Unlike in 2006 when voice services posted a lower market share than data services,the popularity of mobile services and the entry of new mobile SPs with greatpromotions for end users led to increased wireless services market share (87.9%) in2008 compared with data services 12.1% (see Figure 20). Despite posting a hugeshare, voice services are expected to lose about 8.9% to post a 79% market share by2013 while data services will post a 20.2% share by 2013, thanks to the developmentof wireless Internet and 3G networks.28 #VN380101S ©2009 IDC
  35. 35. FIGURE 20Vietnam Wireless Telecommunications Services Spending bySegment, 2008 Data services (12.1%) Voice services (87.9%) n = US$3,246MSource: IDC ASEAN Fixed-Line Tracker and IDC Asia/Pacific Mobile Service Tracker, 2009Major Wireless Telecommunications Service VendorsThere were not many major vendors providing wireless telecom services in Vietnamuntil 2008. Viettel Mobile led the wireless telecom services market with more than 14million subscribers (around 39.2% market share), followed by MobiFone with 9.9million subscribers (26.9% market share), thanks to its history in the mobile servicesmarket. VinaPhone had around 9 million subscribers (24.5% market share), followedby S-Fone. It was the first company that provided CDMA services in Vietnam with a6.4% market share. Although it was only established in 2004, Viettel was able to passover its competitors to become the leader in the wireless services space due to strongprice restructuring. E-Mobile and Vietnam Mobile were established in 2006 and so didnot have that many subscribers, posting only 2.7% and 0.3% market shares,respectively (see Figure 21).©2009 IDC #VN380101S 29
  36. 36. FIGURE 21Vietnam Wireless Telecommunications Service Vendor Shares,2008 HT Mobile (0.3%) E-Mobile (2.7%) VinaPhone S-Fone (6.4%) (24.5%) Viettel (39.2%) MobiFone (26.9%) n = US$36.9MSource: IDC Vietnam and Vietnam Government Statistics, 2008Table 4 shows some pertinent information on wireless SPs in Vietnam. TABLE 4 Vietnam Wireless SPs, 2006 Service Name Operator Ownership Launch Technology Subscribers MobiFone VMS VNPT (previously via BCC 1993 GSM 9,939,139 with Comvik International) VinaPhone GPC VNPT 1996 GSM 9,020,629 Viettel Mobile Viettel Telecom Military Telecommunications 2004 GSM 14,472,276 Corporation S-Fone SPT/SLD US$230 million BCC between 2003 CMDA2000-1x 2,345,432 Saigon Postel and SLD and EV-DO Telecom (55% SK Telecom, LG, and Dong A) E-Mobile EVN Telecom Electricity Corporation of 2006 CDMA450MHz 979,293 Vietnam and EV-DO Vietnamobile Hanoi Telecom US$657 million BCC 2006 GSM (previously 124,503 (previously partnership between Hanoi CMDA2000-1x HT Mobile) Telecom and Hutchison and EV-DO) Telecom30 #VN380101S ©2009 IDC
  37. 37. TABLE 4 Vietnam Wireless SPs, 2006 Service Name Operator Ownership Launch Technology Subscribers Gtel Mobile Gtel/VimPelCom Joint venture of Gtel (owned Trial GSM NA by the Ministry of Public Security) and VimPelCom (Gtel 60%, VimPelCom 40%) VTC Mobile VTC 100% state owned License is NA NA pending Indochina Indochina Ministry of National Defense License is NA NA Mobile Telecom pending Source: IDC Vietnam, 2009FUTURE OUTLOOKForecast and AssumptionsOverall MarketTable 5 shows the key forecast assumptions fro the Vietnam ICT market from 2009 to2013. TABLE 5 Key Forecast Assumptions for Vietnam Information and Communication Technology, 2009–2013 Accelerator/ Inhibitor/ Certainty of Market Force IDC Assumption Impact Neutral Assumption Macroeconomics GDP growth The economic growth slowed High. The economy is down from the heady rates expected to record a 1–2% recorded in recent years. growth rate in 2009. Short-term Nonetheless, in the next few expectations have slightly years, the growth will be driven improved though while long-   by strong industrial expansion, term growth is still optimistic, as consumer spending, and fixed the countrys infrastructure investments. continues to be built out.©2009 IDC #VN380101S 31
  38. 38. TABLE 5 Key Forecast Assumptions for Vietnam Information and Communication Technology, 2009–2013 Accelerator/ Inhibitor/ Certainty of Market Force IDC Assumption Impact Neutral Assumption Global financial The global economic growth High. The impact on IT crisis will turn negative in 2009 expenditure will be seen across although forecast groups most segments with expect 2010 to be markedly retail/wholesale, consumer, better. The economic stimulus financial services, travel, and plans being enacted will have manufacturing most likely to the effect of increasing the feel the brunt in 2009. IDC consumer and business assumes gradual recovery   confidence and keep things starting 2010 before returning from getting worse but will have to normal by 2012. little impact on the market demand or employment in 2009. More of the effects will be seen by 2010. Inflation The consumer price inflation Moderate. Inflation will remain rate soared to a record high of a critical concern in Vietnam 25% YoY in 2008. Fortunately, and can theoretically slow down there was some evidence that IT purchasing in the process, inflation may be slowing down, particularly in the consumer   as estimates for 2009 reach 5% side due to high costs. largely due to a sharp drop in fuel costs. Foreign The government will still Moderate. The total FDI and investments depend on foreign investments new projects fell, which can to help develop the lead to low demand. Hopefully, environment and infrastructure. this situation will improved by Some IT upgrade and 2010 when the economy   education reform projects need returns to normal. support from FDIs and official development assistance. WTO entry Vietnams accession to the Moderate. An import-driven WTO in January 2007 helped economy will help grow the increase foreign investor market, especially as increased interest. With the United competition from foreign brands Nations (UN) recently ranking forces local vendors to become Vietnam among the 10 most more competitive. Vietnams attractive FDI destinations, its WTO entry will also increase   WTO accession also helped ICT investments and reduce support export growth. tariffs by 10% by 2012. However, falling tariff barriers will make imports increasingly affordable in comparison with domestic products.32 #VN380101S ©2009 IDC
  39. 39. TABLE 5 Key Forecast Assumptions for Vietnam Information and Communication Technology, 2009–2013 Accelerator/ Inhibitor/ Certainty of Market Force IDC Assumption Impact Neutral Assumption Interest rates As part of the economic Moderate. Reduced interest stimulus plan, interest rates rates can help create good were reduced from 10% to conditions for SMBs to survive around 5%. The government through the economic crisis. will compensate banks 4% to However, IDC continued to   deploy this policy for lower its SMB PC forecast, enterprises. given the lack of economic clarity. Value-added tax After having raised the VAT Moderate. The PC VAT was (VAT) reductions from 5% to 10% in January already 5% last year. 2009, the government reversed Therefore, IDC believes that its course and cut the VAT back this policy will not have a strong to 5% in order to encourage effect on the PC market.   people to consume more PCs. This new tax will be valid through the end of 2009. Political issues The new Prime Minister is High. A stable and better- younger and is taking more structured political environment aggressive action, especially in will create an attractive and terms of policy direction. For hospitable environment for example, the simplified foreign investments and paperwork called the "One- business activity. Local Gate" Policy has been governments in provinces did   implemented, applying the use not follow the central of IT. As a result, the political governments One-Gate Policy, situation in Vietnam remains which highly utilizes technology stable. in administration. This could have presented ample opportunities for IT vendors. Oil prices Oil prices substantially Low. Lower oil prices will have weakened in recent months, some positive effect on the alleviating some inflationary regions overall economy but pressures and lessening the should have no direct impact on impact on private consumption IT budgets. Average sales   and consumer spending. values (ASVs) may benefit slightly due to lower import costs but will also likely be relatively insignificant.©2009 IDC #VN380101S 33

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