HO CHI MINH CITY -- Vietnamese smartphone maker VinSmart is entering the European market in a bold bid to become the country's first globally recognized smartphone brand. But while the company is hopeful it can follow in the footsteps of Chinese makers that have cracked Western markets, snatching market share from the likes of Apple and Samsung will not be easy.
Four models made by VinSmart, a subsidiary of property conglomerate Vingroup, hit stores in Spain in March, just three months after the phones went on sale in Vietnam.
Investors are keenly watching the move, which is part of Vingroup's ambitions to become a global technology brand. Other plans include setting up research centers around the globe, including in the U.S.
VinSmart is aiming high in Europe, according to Nguyen Thi Bich Phuong, the company's deputy general director for marketing. "We plan to be among the top five smartphone brands in European markets within two years," Phuong said.
The top five smartphone brands in Europe shipped a total of 197 million units last year, according to gs.statcounter, which means VinSmart will have to ramp up sales quickly to achieve its goal.
The four models, marketed under the brand name Vsmart, are priced between 199.90 euros and 349.90 euros and will be distributed at 90 Media Markt stores in Spain. German-based Media Markt is the continent's largest retailer of consumer electronics.
Following the Spanish launch, VinSmart is looking to expand to Germany, Portugal and France. The company plans to supply the market from its Hai Phong factory, which is capable of producing 5 million units annually. The 30 million euro ($33.9 million) plant began producing phones last year when VinSmart acquired a 51% stake in Spanish electronics manufacturer BQ.
Leveraging BQ's assets, VinSmart aims to become a serious player in global smartphone market.
But to achieve that, VinSmart must compete against stiff competition. In February, Samsung was the leader in Europe, with a 34.4% of market share by shipments, followed by Apple at 27.69%, Huawei at 17.37%, Xiaomi at 4.9% and LG at 3.24%.
Vietnam's state-owned telecom company Viettel, leading IT company FPT, and software developer BKAV have entered the country's mobile phone market, but all fell short of gaining brand recognition. MobiiStar is rare example of a Vietnamese phone maker that has succeeded overseas. It entered the Indian market last year after winning a slice of the rural market at home.
As part of its Europe ambitions, VinSmart plans to open another factory in Hanoi soon, although the company declined to share details about the facility. VinSmart says it will employ BQ's intellectual property to boost production efficiency as well as the quality of its handsets.
BQ, one of five Spanish mobile phone producers, posted revenue of 190 million euros in 2017, up 4.7%, having sold more than 1 million of its Aquaris smartphones to end the year with a 10.3% share of Spain's market. But it came under pressure when Xiaomi phones hit the market in November 2017.
Vingroup, meanwhile, is Vietnam's largest company by market value. Beginning as a real estate and retail-focused conglomerate founded by Pham Nhat Vuong, the company is beginning to branch out, although the bulk of its earnings still come from real estate. Last year 82.7% of the group's revenue of 122 trillion dong ($5.25 billion) came from property.
Vuong, who built his business from scratch, had a net worth is $7.6 billion as of March 2019, according to Forbes. He told shareholders at a November annual meeting that the group was moving into manufacturing and technology with a focus on smartphones and automotive businesses.
The group plans to set up a network of research and development projects by the end of the year in the U.S., South Korea, Japan, China, Israel and Singapore to develop new technologies, including artificial intelligence and internet-of-things for smart electronic devices.
But some financial analysts in Vietnam say Vingroup's rapid expansion is a "risky strategy" because it must compete against rival who control large pieces of the market share.
Investors will wait and see how the group fares, said an analyst who requested anonymity. "This is the first case of a private Vietnamese company making serious steps to expand overseas since Hanoi [committed to fostering a private-sector economy] in 2017," he said.
VinSmart's success as a local smartphone brand could cement Vietnam's position as a key exporter of handsets. Samsung operates two mobile phone factories in Vietnam with a combined annual output of 120 million units.
Vietnam's exports for telephones, mobile phones and related components increased 8.4% year-on-year to $49.08 billion in 2018, largely because of Samsung's operations there. This accounted for 20% of the country's total export value at $243.48 billion, according to Vietnam Customs.
Samsung is said to be building its third manufacturing facility in Vietnam "to possibly replace a facility in China," after opening the world's largest mobile phone factory in India in July last year. That factory's capacity is 120 million units a year.
More than 1.55 billion smartphones were sold worldwide in 2017, largely from the top five manufacturers: Samsung, Apple, Huawei, Oppo and Xiaomi. However, global smartphone shipments in 2018 dropped 4.1% to 1.4 billion units, a blow to an industry that has grown accustomed to rapid growth. The number of smartphone users is forecast to grow from 2.1 billion in 2016 to 2.5 billion in 2019.
While both Samsung and Apple reported declines in shipments in 2018, Chinese vendors, including Huawei, Oppo and Xiaomi, posted increased shipments, according to the research company IDC. Last year, Samsung shipped 291.3 million units worldwide, down 8.2% from the previous year.