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Vietnam smartphone makers break from Samsung empire

Domestic brands challenge global majors with low-priced models

Bkav's Bphone is displayed at the company's plant in Hanoi.   © Reuters

HANOI -- Vietnamese companies, including some that are new to the sector, plan to launch or expand production of smartphones, in a challenge to foreign makers, especially Samsung Electronics, which dominates the market in the country.

Vingroup, the biggest property developer in Vietnam, has announced a plan to produce smartphones starting in 2018, while home electronics maker Asanzo is set to produce 600,000 smartphones in 2018, up 50 times from the previous year.

Both peers are using the technology acquired from their experience in original equipment manufacturing to capitalize on the rapidly growing market.

While Samsung has captured nearly half of the smartphone market in Vietnam, local companies will embark on marketing offensives with low-priced models.

Vingroup recently set up VinSmart with a capital of $131 million to break into the smartphone market. The new subsidiary will build a manufacturing plant in an industrial park in Hai Phong, a coastal city in northern Vietnam.

Samsung has created a smartphone production hub in Vietnam by bringing in South Korean, Japanese and other suppliers, some of which have begun providing parts to Vietnamese markers. Technologies needed for smartphone production are being accumulated in Vietnam through such developments as engineers joining local companies.

The smartphone market in Vietnam has been rapidly growing at an annual pace of around 10%, more than doubling sales in 2017 from 2014 to 15 million units. Oppo, which entered the market in 2012, surpassed Apple as the second-largest smartphone supplier in Vietnam in only five years, thanks to such features as advanced selfie functions. Another Chinese maker Xiaomi is striving to expand its market share through a sales tie-up with leading Vietnamese consumer electronics retailer Digiworld.

The company announced a decision last September to manufacture automobiles and is building a plant in the industrial park. The smartphone factory will be set up next to the auto plant.

It will first enter the affordable segment, as it did with its automobile strategy, and later move into products with higher added value, said Nguyen Viet Quang, vice chairman of the group. He suggested that the subsidiary will initially promote inexpensive smartphones.

Vingroup has already tied up with an overseas smartphone maker in a bid to produce low-priced and profitable models. It will in the meantime learn technologies from the partner, according to sources familiar with its strategy.

Asanzo, which primarily produces TVs, will spend 200 billion dong ($8.73 million) to sharply increase its production of smartphones this year. The company entered the smartphone market with two models in 2017 and has since produced a total of only 12,000 units.

In 2018, Asanzo plans to release new models every quarter, hoping to produce more than 600,000 units.

Asanzo is considering releasing inexpensive models, priced at 1 million dong, with simplified functions, said company Chairman Pham Van Tam. Samsung's handsets are sold in the country in the range of 2.5 million to 25 million dong while price tags for Apple's iPhone range from 9 million to 30 million dong.

The company chalked up 4.62 trillion dong in sales in 2017, about 90% of which came from TVs. Smartphones contributed to less than 1% of total sales, but the company plans to raise the ratio to 30% in 2020.

Bkav, a leading security software company in Vietnam, put the country's first domestically made smartphone on the market under the name of Bphone in 2015. As suggested by the name, Bkav had Apple's iPhone in mind when it released its smartphone as a high-end model priced some 40% lower than iPhones at the time.

While word is circulating that Bkav will introduce a new model this summer, the company has made no announcement yet.

The smartphone market in Vietnam has been rapidly expanding in recent years and an estimated 30 million to 40 million units are in use. In 2017 alone, 15 million smartphones were sold.

Samsung, which produces smartphones in Vietnam, has taken a 46.5% share of the local market, followed by Oppo Electronics of China at 19.4% and Apple at 9.2%.

Vietnamese companies are able to produce smartphones thanks to the presence of Samsung. The South Korean electronics giant began making smartphones in the northern Vietnamese province of Bac Ninh in 2009.

Low-priced smartphones are only a niche market in Vietnam, maintaining a low level of demand, because low-income people tend to buy flip phones.

Even well-known companies struggle in Vietnam, because local consumers are highly selective about their purchases. For example, smartphones offered by Nokia of Finland and Sony of Japan enjoy little popularity in the southeast Asian country.

The future of smartphones produced by Vietnamese companies will depend on whether they can manufacture products having appealing features on top of low prices and attract consumers through social networking services and other marketing strategies.

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