BMI Vietnam Information Technology Report Q2 2014 PDF

Q2 2014
www.businessmonitor.com
VIETNAM
INFORMATION TECHNOLOGY REPORT
INCLUDES 5-YEAR FORECASTS TO 2018
ISSN 2044-9631
Published by:Business Monitor International
Vietnam Information Technology

Report Q2 2014
INCLUDES 5-YEAR FORECASTS TO 2018
Part of BMIs Industry Report & Forecasts Series

Published by: Business Monitor International
Copy deadline: March 2014
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Vietnam Information Technology Report Q2 2014
CONTENTS
BMI Industry View ............................................................................................................... 7
SWOT .................................................................................................................................... 9
IT SWOT .................................................................................................................................................. 9
Wireline ................................................................................................................................................. 11
Political ................................................................................................................................................. 13
Economic ............................................................................................................................................... 14
Business Environment .............................................................................................................................. 15
Industry Forecast .............................................................................................................. 16

Table: Vietnam IT Industry - Historical Data And Forecasts (VNDbn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Broadband ............................................................................................................................................. 21
Table: Telecoms Sector - Broadband - Historical Data And Forecasts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Macroeconomic Forecasts ............................................................................................... 23

Table: Vietnam - Economic Activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Industry Risk Reward Ratings .......................................................................................... 27

Table: Asia Pacific IT Risk/Reward Ratings - Q2 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Market Overview ............................................................................................................... 30

Hardware ............................................................................................................................................. 30
Software ............................................................................................................................................... 36
Services ................................................................................................................................................ 47
Industry Trends And Developments ................................................................................ 52

Regulatory Development .................................................................................................. 56
Table: Government Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Regulatory News .................................................................................................................................... 59
Competitive Landscape .................................................................................................... 62

International Companies ......................................................................................................................... 62
Table: Samsung Electronics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Table: Intel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Table: LG Electronics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Table: Global CyberSoft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Local Companies ................................................................................................................................... 66

Table: Sara Vietnam . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Company Profile ................................................................................................................ 67

FPT Software .......................................................................................................................................... 67
Table: FPT Group Revenue By Segment (VNDbn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Table: Profit Before Tax Margin By Segment (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Page 4
Regional Overview ............................................................................................................ 72

Hardware Sales Opportunity Remains ........................................................................................................ 74
Demographic Forecast ..................................................................................................... 76

Table: Vietnam's Population By Age Group, 1990-2020 ('000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Table: Vietnam's Population By Age Group, 1990-2020 (% of total) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
Table: Vietnam's Key Population Ratios, 1990-2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
Table: Vietnam's Rural And Urban Population, 1990-2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
Methodology ...................................................................................................................... 80
Industry Forecast Methodology ................................................................................................................ 80
Sources ................................................................................................................................................ 81
Risk/Reward Ratings Methodology ............................................................................................................ 82
Table: It Risk/Reward Ratings Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
Table: Weighting Of Components . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
Page 5
BMI Industry View

BMI View: Vietnam's IT market is set to maintain its position as a regional outperformer over the medium
term. We forecast IT spending will grow at a compound annual growth rate (CAGR) of 12.6% between
2014 and 2018, with expansion underpinned by rising incomes, enterprise modernisation and the policy
environment put in place by the government. We also highlight larger opportunities in the retail market
where penetration of devices and services remains below the level in neighbouring markets, which vendors
will be able to tap as incomes rise. The government is also a significant factor underpinning our bright
outlook as it pursues a range of ICT initiatives and allocates funding to develop Vietnam's domestic IT
industry. These policies include the promotion of Vietnam as an outsourcing destination, with the services
segment expected to expand rapidly. There is also increasing momentum towards Vietnam becoming a
global centre for electronics production as wages rise in China and manufacturers look to protect margins
by moving to Vietnam, where wages are as little as a third of those in China.
Headline Expenditure Projections
Computer Hardware Sales: VND44,389bn in 2013 to VND74,872bn in 2018, CAGR of +11% in local
currency terms. Strong sales growth forecast to continue as rising incomes, declining device prices and
improved credit provision underpin demand growth.
Software Sales: VND5,610bn in 2013 to VND11,766bn in 2018, CAGR of +16% in local currency
terms. Piracy continues to be a drag on the market, but there are large opportunities in business software
and security solutions for vendors willing to accept narrow margins in a price-sensitive market.
IT Services Sales: VND12,083bn in 2013 to VND25,952bn in 2018, CAGR of +16.5% in local currency
terms. The services segment is forecast to outperform due to strong domestic demand, and a boom in
investment for outsourcing provision to Japanese enterprises.
Key Trends & Developments
BMI forecasts another bumper year of hardware spending growth in the retail market in Vietnam during
2014, in contrast to more developed markets in the region where growth has slowed markedly as notebook
sales have been cannibalised by low-cost tablets. In Vietnam, penetration of desktops and notebooks is
below the APAC average, and we expect volume growth to continue in 2014 as households demand the
extra functionality provided by traditional form factors, particularly when purchasing a single device for the
household. Meanwhile, as is the case globally, tablet volumes will boom as demand from youth and young
adult segments is tapped by vendors with global presence, as well as low-cost brands from China. Another
positive for the market is the easing of the traditional bottleneck of credit access in mid-2013 as retailers
such as Vien Thong A, Dienmay.com, Phong Vu, Hoan Long and Nguyen Kim cut prices and partnered
Page 7
with banks including HSBC, VietinBank, ANZ and Sacombank to directly offer interest-free instalment
payment plans.
Vietnam is rapidly emerging as an important location in global supply chains for both IT hardware and
services. The government has created an attractive policy environment, including targets for training skilled
employees from local universities and the use of tax incentives to persuade firms to locate offices in the
country. These policies, combined with low wages and proximity to large markets, means the trend of firms
investing is gathering momentum. The first major investment came from chip manufacturer Intel,
announced in 2006, but other investments have followed from Samsung Electronics, which expects to
produce as much of 40% of its global smartphones and tablets in Vietnam by 2015. Vietnam is also an
emerging destination for outsourcing, with multinationals increasingly turning away from China in favour
of lower cost and higher security locations.
Page 8
SWOT
IT SWOT
SWOT Analysis
Strengths
Supportive policy framework and funding in place to promote the development of the
IT sector.
Vietnam's gradual integration into the global trade network via its accession into trade
organisations such as ASEAN and WTO, as well as bilateral agreements with Japan
and China.
The domestic IT market is in a rapid growth phase, with trade liberalisation and
growing affordability driving increased adoption among enterprises and consumers.
Expanding local hardware production industry with major international players such
as Samsung, Nokia, LG and Intel making large investments.
Weaknesses
IT spend per capita is much lower than in neighbouring Thailand, reflecting a much
lower GDP per capita.
Limited access to credit and budgets restrain spending by SMEs.
Highly cost-sensitive market, with 75% of software provided by lower-cost local

software vendors.
Opportunities
High level of software piracy, although some progress has been made in recent years.
Low PC penetration means there is scope for vendors to tap first-time buyer market
as well as the upgrade/replacement market. Due to low penetration desktop and
notebook sales continue to increase despite competition from tablets.
Low-cost tablets are proving popular with consumers, with significant medium-term
sales growth potential as incomes continue to rise.
Vietnam is a popular destination for software development and IT services

outsourcing, with particularly strong growth potential from Japanese enterprises that
are turning away from Chinese based providers.
Page 9
SWOT Analysis - Continued
National IT Plan will drive spending on IT utilisation in areas such as e-government, etaxation and education.
SMEs have much potential to increase spending on basic solutions, including

customer relationship management and security.
The government's drive to create a significant IT services industry over the next 15-20
years - through incentives to create IT clusters - is expected to be a significant factor
shaping the market.
Threats
Low-cost tablets from own-brand Chinese vendors a particular threat to low- and
mid-range notebook vendors. Falling prices may further undermine margins and
profitability after steep discounting.
Cyber security issues could undermine confidence in IT solutions and services, with
big data and cloud computing vulnerable.
Yen depreciation has hit the software outsourcing market by making exports less
competitive and eroding Vietnam's cost advantages.
Page 10
Wireline
SWOT
Strengths
Fixed-line penetration levels and internet user rates are high in major urban centres
such as Ho Chi Minh City, Hanoi, Danang and Haiphong.
Competition exists in fixed-line and internet access markets; VNPT faces competition
from several other state-owned companies and privately owned operators.
High levels of literacy and other demographic factors bode well for strong and
continued demand for wireline services over the next few years.
Weaknesses
Vietnam's fixed-line and internet access markets are dominated by state-controlled

operator VNPT.
Although alternative broadband infrastructures are currently being explored,

broadband growth continues to be highly dependent on DSL.
Low fixed-line penetration rates in rural regions limit the scope for DSL broadband
growth.
Although internet user growth is improving, rural Vietnam still has limited access to
internet infrastructure.
Broadband tariffs remain high, creating a barrier for low-income subscribers to

access.
Opportunities
The privatisation of VNPT could help to bring about increased investment revenue
and the arrival of new skills.
On a national level, broadband penetration rates remain low - this means that the
sector has considerable growth potential.
Significant opportunities exist to develop alternative broadband technologies,

including WiMAX, LTE and fibre; WiMAX and LTE internet services have the potential
to raise the level of internet user penetration in rural parts of Vietnam.
Page 11
SWOT - Continued
Draft Bill of Law on Telecommunication has been put forward for discussion at the
National Assembly Steering Committee. If passed, the bill will allow private
companies to build network infrastructure for the first time and will open up the
telecoms market to foreign investors.
Threats
Fixed-line sector may enter a period of decline, with potentially negative

consequences for DSL growth.
As the market for mobile data services grows, this could have potentially negative
consequences for the growth of fixed broadband services.
VTV's dominance in the pay-TV sector is holding back market development.
Page 12
Political
SWOT Analysis
Strengths
The Communist Party of Vietnam remains committed to market-oriented reforms and

we do not expect major shifts in policy direction over the next five years. The oneparty system is generally conducive to short-term political stability.
Relations with the US have witnessed a marked improvement, and Washington sees
Hanoi as a potential geopolitical ally in South East Asia.
Weaknesses
Corruption among government officials poses a major threat to the legitimacy of the
ruling Communist Party.
There is increasing (albeit still limited) public dissatisfaction with the leadership's tight
control over political dissent.
Opportunities
The government recognises the threat corruption poses to its legitimacy, and has
acted to clamp down on graft among party officials.
Vietnam has allowed legislators to become more vocal in criticising government

policies. This is opening up opportunities for more checks and balances within the
one-party system.
Threats
Macroeconomic instabilities continue to weigh on public acceptance of the one-party

system, and street demonstrations to protest economic conditions could develop into
a full-on challenge of undemocractic rule.
Although strong domestic control will ensure little change to Vietnam's political scene
in the next few years, over the longer term, the one-party-state will probably be
unsustainable.
Relations with China have deteriorated over recent years due to Beijing's more
assertive stance over disputed islands in the South China Sea and domestic criticism
of a large Chinese investment into a bauxite mining project in the central highlands,
which could potentially cause wide-scale environmental damage.
Page 13
Economic
SWOT Analysis
Strengths
Vietnam has been one of the fastest-growing economies in Asia in recent years, with
GDP growth averaging 7.1% annually between 2000 and 2012.
The economic boom has lifted many Vietnamese out of poverty, with the official
poverty rate in the country falling from 58% in 1993 to 20.7% in 2012.
Weaknesses
Vietnam still suffers from substantial trade and fiscal deficits, leaving the economy
vulnerable to global economic uncertainties. The fiscal deficit is dominated by
substantial spending on social subsidies that could be difficult to withdraw.
The heavily-managed and weak currency reduces incentives to improve quality of

exports, and also keeps import costs high, contributing to inflationary pressures.
Opportunities
WTO membership and the upcoming ASEAN AEC in 2015 should give Vietnam
greater access to both foreign markets and capital, while making Vietnamese
enterprises stronger through increased competition.
The government will in spite of the current macroeconomic woes, continue to move
forward with market reforms, including privatisation of state-owned enterprises, and
liberalising the banking sector.
Urbanisation will continue to be a long-term growth driver. The UN forecasts the

urban population rising from 29% of the population to more than 50% by the early
2040s.
Threats
Inflation and deficit concerns have caused some investors to re-assess their hitherto
upbeat view of Vietnam. If the government focuses too much on stimulating growth
and fails to root out inflationary pressure, it risks prolonging macroeconomic
instability, which could lead to a potential crisis.
Prolonged macroeconomic instability could prompt the authorities to put reforms on

hold as they struggle to stabilise the economy.
Page 14
Business Environment
SWOT Analysis
Strengths
Vietnam has a large, skilled and low-cost workforce, which has made the country
attractive to foreign investors.
Vietnam's location - its proximity to China and South East Asia, and its good sea links
- makes it a good base for foreign companies to export to the rest of Asia, and
beyond.
Weaknesses
Vietnam's infrastructure is still weak. Roads, railways and ports are inadequate to
cope with the country's economic growth and links with the outside world.
Vietnam remains one of the world's most corrupt countries. According to

Transparency International's 2012 Corruption Perceptions Index, Vietnam ranks 123
out of 176 countries.
Opportunities
Vietnam is increasingly attracting investment from key Asian economies, such as

Japan, South Korea and Taiwan. This offers the possibility of the transfer of high-tech
skills and know-how.
Vietnam is pressing ahead with the privatisation of state-owned enterprises and the
liberalisation of the banking sector. This should offer foreign investors new entry
points.
Threats
Ongoing trade disputes with the US, and the general threat of American
protectionism, which will remain a concern.
Labour unrest remains a lingering threat. A failure by the authorities to boost skills
levels could leave Vietnam a second-rate economy for an indefinite period.
Page 15
Industry Forecast
Table: Vietnam IT Industry - Historical Data And Forecasts (VNDbn)
2011
2012
2013e
2014f
2015f
2016f
2017f
2018f
IT Market Value
45,404
52,773
62,082
70,215
78,992
89,158
100,339
112,590
o/w Hardware
33,372
38,261
44,389
49,502
54,899
61,073
67,729
74,872
- PC
27,098
31,374
36,754
40,987
45,567
50,691
56,215
62,144
- Servers
3,003
3,443
3,995
4,455
4,941
5,497
6,096
6,739
o/w Software
3,868
4,630
5,610
6,536
7,573
8,804
10,197
11,766
o/w Services
8,165
9,882
12,083
14,178
16,519
19,281
22,413
25,952
1.63
1.63
1.73
1.75
1.76
1.77
1.79
1.80
IT Market, % of
GDP
e/f = BMI estimate/forecast. Source: BMI.
BMI expects Vietnam will be one of the outperforming IT markets in APAC over the medium term. The
market is relatively undeveloped but the IT sector will account for a growing share of GDP over the
duration of our five-year forecast to 2018. The major trends driving this strong growth include increases in
PC penetration, driven by the supply of cheaper hardware from Chinese vendors and a new generation of
devices running Windows 8/8.1. Government spending and policy will also add to growth, through
procurement initiatives, investments in hi-tech industrial parks and policies designed to boost the sector
such as improvements to IT education and security certification schemes for firms. Vietnam's software
development and outsourcing services firms are positioned to benefit from large foreign enterprises seeking
lower cost locations over the medium term.
We expect the IT market in Vietnam will expand to VND70.2trn in 2014, an increase of 13.1% from
VND62.1trn in 2013. We expect strong growth to continue over the medium, term with a CAGR of 12.6%
2018, as the value of the market is set to reach VND112.6trn in 2018.
Page 16
2014 Outlook
BMI forecasts another year of strong growth for
IT Market (VNDmn)
Vietnam's IT market in 2014, albeit a slight

slowdown from 2013. The main factor underpinning
2011-2018
this positive outlook is the strong macroeconomic

environment in Vietnam, as conditions remain
supportive of IT market expansion. We forecast real
125M
100M
GDP growth of 5.9% in 2014 and real growth of

private final consumption of 6.5%. Meanwhile,
traditional areas of weakness, such as access to
75M
50M
credit, have become a less significant factor as a

result of partnerships between banks and retailers
25M
2018f
2017f
2016f
2015f
2014f
2012
Meanwhile, government spending will continue to
2011
0M
2013e
formed in 2013.
be a major source of sales, with spending forecast to

increase by 6.2% in real terms in 2014, and we
e/f = BMI estimate/forecast. Source: BMI.
expect IT spending growth to outpace overall

government spending due to the policy goal of developing the sector. This is evidenced by the Ministry of
Information and Communication's August 2013 proposal to allocate at least 2% of the state budget to
boosting the IT sector each year.
The retail PC market will continue to be a bright spot throughout 2014, with growth forecast for desktop,
notebook and tablet shipments. Despite the positive underlying consumption story there was a small dip in
sales in H113, but retailers moved to partner with banks and ensure credit is available for big ticket
purchases. The influx of low-priced Chinese own-brand tablets since 2012 has deepened the market and
vendors in the notebook category have been lowering prices to compete with this influx, which has helped
make devices more affordable and boosted sales. We expect rising incomes, credit availability, price
declines in the notebook and tablet categories and telecoms infrastructure investments will all contribute to
strong demand in 2014.
Meanwhile, government spending and PC subsidy programmes will continue to be supportive of the PC
market in 2014 as the government continues to roll out IT modernisation programmes. The government has
been spending heavily on IT, with around 50% of this going to hardware in recent years. It has also spent
Page 17
heavily on licensing software used by government agencies, but in 2013 the Ho Chi Minh City government
began a push to increase the utilisation of open-source software, which could be replicated elsewhere.
However, in early 2014 it was reported that the government was abandoning part of its open source
implementation project due to a shortage of technical maintenance staff in the country.
In terms of the enterprise sector in Vietnam, the outsourcing market continues to develop rapidly, although
the outlook for 2014 is weaker than previous years. Vietnam has become the first choice for Japanese
enterprises looking to outsource functions in recent years, primarily based on the cost advantages offered.
However, the depreciation of the yen against the US dollar has hit the competitiveness of Vietnamese
providers, and will be a drag on expansion. This weakens the outlook, but with a well developed
outsourcing industry in Vietnam and several clusters, and underlying cost advantages, BMI expects demand
will continue to expand.
Drivers
The government is a major supporter of the development of the IT market in Vietnam through policy
initiatives and financing. Policies include promoting the use of IT by government agencies, citizens and
enterprises - as well as promoting the development of local industry, particularly in software and
outsourcing services.
For instance, in November 2014 the government announced it would spend USD400,000 on building its
own version of California's Silicon Valley for start-ups, with two accelerators set up in Hanoi and Ho Chi
Minh city. The government hopes the development will help mature emerging technology companies in the
country and link them with suitable venture capital. A number of government ministries and organisations,
including the Ministry of Education and Training, have also started to promote the roll-out of cloud
services. The government has also promoted the IT industry through policy and incentives to grow hi-tech
parks, both for the construction of IT hardware, but increasingly software and IT services.
A specific IT development initiative is the government's drive to grow the IT services industry over the next
15-20 years. The cost of outsourcing in Vietnam was estimated in 2013 research to be as much as 30%
lower than in China, a fact which Japanese firms were especially aware of. The momentum that could be
garnered from Japanese enterprises shifting business process and software development outsourcing to
Vietnam could see medium term increases from European and North American demand.
However, growth will depend on government progress on various business environment issues, including
copyright protection and combating cyber security threats. Further progress in combating software piracy,
Page 18
which is still reported to be at higher levels than in China, India and Thailand, despite some progress in
recent years, is required. It is also taking steps to increase the penetration of information security
certification by distributing funds to enterprises. In August 2013 it was reported that the government was
investing US$42mn in the creation of the National Centre for Network Security Technology. The
government is also updating the Law on Information Security, which closed for public comment in July
2013, as it looks to improve the cyber security environment including combating attacks originating in
Vietnam.
Improvements to supporting infrastructure are also driving IT market development. Telecoms operators are
investing in the expansion of both wireline and wireless broadband network infrastructure to rural areas, as
well as upgrading capacity of urban infrastructure and improving backbone networks. Additionally,
telecoms operators such as Viettel are emerging as significant distribution channels for notebooks as
vendors seek tie-ups. In a country where PC penetration remains low, particularly in rural areas,
government digital divide programmes to boost internet and digital utility in rural areas underpin
addressable market growth and open PC ownership to a growing number of rural inhabitants.
Segments
The government is a major source of demand for IT vendors, across the hardware, software and services
segments. In April 2013 the Ho-Chi Minh City authority announced plans to spend VND300bn (US
$14.3mn) on developing e-government capacity. It will also focus on replacing out of date hardware and
improving network security in 2013. An additional feature is the authority's intention to work with local
small and medium IT enterprises where possible, rather than immediately turning to large IT vendors.
Spending in 2013 was a marked increase over the 2005-2012 period when the city authority carried out
1,012 projects with a total spend of VND665bn.
Large Vietnamese companies are the most likely to buy packaged software from multinationals, which have
only around 25% of the local software market. In the large corporate sector, growing demand for digital
infrastructure projects in segments such as banking, telecoms and energy has attracted global IT services
leaders, such as IBM, to invest in Vietnam. Foreign investment, particularly by Japanese companies, in call
centres and other areas will help to grow the market.
Smaller enterprises have a lower penetration of enterprise software, including ERP and security software,
but due to price sensitivity favour local solutions. The SME market is an area of the market in which
vendors can achieve growth as SME awareness of the benefits of IT utilisation increase, encouraged by
government initiatives to modernise firms and improve international competitiveness. However, vendors
Page 19
will have to face the challenge of enterprises that are constrained by low budgets and lack of access to
credit. Promising SME verticals include discrete manufacturing and consumer packaged goods, as well as
hotels and property management. The solution areas with most demand currently include security software
and key applications such as CRM, ERP and HR management.
An increasing number of Vietnamese companies have shown an interest in and willingness to use cloud
services, although the market is only in the early stages of development. In the short term weaknesses in
telecoms infrastructure - in terms of reach and capacity - will limit cloud service adoption, but this barrier
will erode over the medium term. The government has also got involved in encouraging the development of
this business model in Vietnam and new cloud computing offerings and increased competition in this
segment should fuel further demand from end-users to utilise this technology.
Summary
Overall, the hardware market is anticipated to grow from VND44,389bn in 2013 to VND74,872bn in 2018,
with computer sales rising from VND36,754bn to VND62,144bn over the same period. Software spending
should rise from VND5,610bn to VND11,766bn and IT services from VND12,083bn to VND25,952bn over
the forecast period.
Page 20
Broadband
Table: Telecoms Sector - Broadband - Historical Data And Forecasts
2011
No. of internet users ('000)
No. of internet users/100 inhabitants
No. of fixed broadband internet subscribers ('000)
No. of fixed broadband internet subscribers/100
inhabitants
2012 2013ef
2014f
2015f
2016f
2017f
2018f
15,398 16,407 16,716 16,884 16,906 16,947 16,974 16,990

17.1
18.1
18.2
18.2
18.1
18.0
17.9
17.8
4,085
4,447
4,624
4,763
4,858
4,956
5,045
5,126
4.5
4.9
5.0
5.1
5.2
5.3
5.3
5.4
e/f = BMI estimate/forecast. Source: BMI, VNNIC
According to data provided by the Vietnam Internet

Network Information Centre (VNNIC), there were
Industry Trends - Broadband

Sector
31.3mn internet users in Vietnam at the end of

November 2012, up from 30.6mn in 2011. Vietnam's
2011-2018
internet sector continued to exhibit slower growth in

2012, continuing on from the trend seen in 2011.
The average monthly growth rate for 2011 was
1.1%, which was lower than the growth average in
2010 (1.4%). The first 11 months of 2012 saw even
weaker growth, with an average month-on-month
(m-o-m) growth rate of just 0.2%. Given that the
number of 3G subscriptions has surged in the past
year, it is possible that the VNNIC does not take into
account mobile internet users in its definition.
Fixed internet services are experiencing muted
e/f = BMI estimate/forecast. Source: BMI, VNNIC
growth due to the higher cost of ownership as

consumers need to purchase personal computers,
namely desktops and notebooks. There has been no explanation for the sudden decline in subscriber growth,
but market saturation is likely to play a significant role. We now estimate 32.1mn internet subscribers in
Vietnam at the end of 2013, a penetration rate of 35.4%. We expect this number to increase to 34.7mn by
end-2018, a 36.9% penetration rate.
Page 21
Although the internet user penetration rate is expected to be approaching saturation in major cities and
towns, rural Vietnam remains comparatively untapped as a result of consumers' lower purchasing power.
However, expansion into these areas is costly and the return on investment is not as attractive. Mobile
internet services are a more efficient way to capture customers in rural areas.
Vietnam's fixed broadband subscriber market grew by 22.8% in 2010, which was a significant slowdown
from 44.8% in the preceding year. The market registered growth rates of 150.3% in 2007 and 58.3% in
2008, but the higher growth momentum could be attributed to a low-base effect.
Like the overall internet sector, Vietnam's broadband industry is experiencing a slowdown. There were
4.3mn broadband subscribers at the end of November 2012, up by 8.0% y-o-y. The average monthly growth
rate in the first 11 months of 2012 was 0.5%, down from the 1.0% in the whole of 2011. This was due to the
contractions in the months ended June 2012, September and November 2012. We have raised our
broadband forecasts this quarter, however, in light of strong growth reported in the ministry's subscriber
figures. According to MIC, there was a surge in broadband subscribers in end-2012, and, by end-March
2013, there were 4.8mn subscribers in the country.
Although Vietnamese telecoms companies continue to deploy broadband services such as fibre-to-the-x,
affordability and coverage remain key concerns in the emerging market. Furthermore, demand for
traditional fixed broadband services is increasingly under threat from mobile alternatives due to a lower cost
structure. While we believe there will be limited growth potential for the fixed broadband industry in
Vietnam in the near future, we retain an optimistic view in light of Vietnam's growing affluence and
expanding middle class. While next-generation mobile technologies LTE and WiMAX could cannibalise
demand for fixed broadband solutions, companies could generate consumer interest by introducing
bandwidth-intensive services such as IPTV or target businesses by offering bundled packages such as cloud
solutions.
We expect the growth rate of the Vietnamese broadband market to decline in the next few years as
consumers opt for mobile alternatives. That said, declining prices of products and services should help the
sector to grow by an average of 2.0% between 2013 to 2018 to bring the total number of fixed broadband
subscribers in Vietnam to 5.4mn by 2018.
Page 22
Macroeconomic Forecasts
BMI View: Vietnam's latest real GDP reading, which showed that the economy expanded by 6.0% year-onyear (y-o-y) in Q413, has reaffirmed our conviction that the Vietnamese economy will begin 2014 on a
strong note. Not only are we witnessing more evidence of a sustained pick-up in production activity and
employment in the manufacturing sector, but we also expect foreign direct investment (FDI) inflows to
accelerate as the economic recovery gathers pace over the coming quarters. We forecast real GDP growth
to come in at 5.9% in 2014, versus Bloomberg consensus of 5.5%.
In line with our view that the Vietnamese economy would accelerate forcefully into the final months of the
year (see 'Economy Picking Up Pace', October 4 2013), latest data released by the General Statistics Office
(GSO) showed that the economy expanded by 6.0% year-on-year (y-o-y) in Q413. This translates into fullyear growth of 5.4% for 2013, just slightly above our forecast of 5.3%. The latest GDP reading, combined
with the strong set of economic data we have seen in recent weeks (accelerating foreign direct investment
inflows, remittances, and merchandise trade exports), have reaffirmed our conviction that the Vietnamese
economy will begin 2014 on a strong note.
Page 23
Looking At A Strong Start For 2014

Vietnam - Real GDP Growth, % (LHS) & Contribution By GFCF & Private Consumption, pp (RHS)
Source: BMI, General Statistics Office. (e = estimates, f = BMI forecasts)
Signs Of Improvement
Despite the lack of progress with regards to banking sector reforms and efforts to ease lending conditions
(credit growth is estimated to have expanded by around 9% in 2013, well under the State Bank of Vietnam's
initial target of 12%), the economy appears to be holding up well. Not only are we witnessing more
evidence of a sustained pick-up in production activity and employment in the manufacturing sector (see
'Strong PMI Reading Reinforces Outlook On Growth', November 5 2013), but we also expect foreign direct
investment (FDI) inflows into the export sector to accelerate as the economic recovery gathers pace over the
coming quarters.
Private Sector Investment To Drive Recovery
According to figures published by GSO, FDI-related exports made up an estimated 67% of the country's
total exports for the first 11 months of the year. Thus, although increased FDI inflows could potentially
result in a temporary deterioration in the country's trade and current account dynamics due to a burst of
Page 24
capital goods imports in the near term, we believe that this is a long-term positive for the economy.
Furthermore, we view FDI inflows as a crucial source of economic growth over the coming quarters given
that the Vietnamese government is struggling to unlock domestic lending. We forecast real gross fixed
capital formation (GFCF) growth to come in at around 10% in 2014, contributing around 2.7 percentage
points (pp) to our real GDP growth forecast of 5.9%.
Expenditure Breakdown
Private Consumption: We expect private consumption to grow at a relatively resilient pace of 6.5% in
2014. However, we note that the risk of further bankruptcies among SMEs could potentially lead to
widespread job losses, especially in export-driven sectors. Uncertainties over the outlook for employment
could, in turn, prompt households to cut back on spending.
Gross Fixed Capital Formation: We foresee a pickup in private sector investment growth in 2014, partly
led by increased foreign direct investment inflows. We believe lending rates will gradually ease over the
coming months as the effect of rate cuts in 2013 by the SBV begins to kick in. We are also seeing evidence
that credit conditions are improving. Accordingly, we expect gross fixed capital formation growth to
accelerate substantially from 4.1% in 2013 to 10.0% in 2014.
Public Spending: We expect total public spending to remain relatively resilient in 2014, expanding at a
respectable pace of 6.5%. However, there is limited room for the government to increase spending further
owing to concerns over the need to finance a potential bailout of ailing state-owned commercial banks.
Net Exports: Net exports remain the biggest downside risk to our outlook for the Vietnamese economy,
although we expect external demand to pick up in 2014. Vietnam's trade account has fallen back into
deficits in recent months, but we see the case for a substantial pickup in external demand on the back of a
rebound in regional growth over the coming quarters. Accordingly, we still expect exports to expand at a
moderate pace of 5.6% in 2014.
Page 25
Table: Vietnam - Economic Activity
2011
Nominal GDP,
VNDbn 3
Nominal GDP,
US$bn 3
2012
2013e
2014f
2015f
2016f
2017f
2018f
2,779,880.2 3,245,419.2 3,584,261.0 4,012,847.7 4,494,844.6 5,033,219.9 5,616,365.8 6,269,265.3

134.6
155.6
170.6
195.1
221.1
249
280.8
316.6
6.2
5.2
5.4
5.9
6.4
6.6
6.4
6.4
GDP per capita,

US$ 3
1,497
1,713
1,860
2,108
2,368
2,643
2,957
3,309
Population, mn 4
89.9
90.8
91.7e
92.5
93.4
94.2
95
95.7
Industrial
production, %yo-y, ave 1,5
10.9
7.0
5.9
7.7
8.4
8.6
8.6
8.5
Unemployment,
% of labour
force, eop 2,6
3.6
3.2
3.7e
3.5
3.5
3.6
3.5
3.5
Real GDP
growth, %y-o-y 3
Notes: e BMI estimates. f BMI forecasts. 1 at 1994 prices; 2 Urban Area Only. Sources: 3 Asian Development Bank,
General Statistics Office; 4 World Bank/UN/BMI; 5 General Statistics Office; 6 General Statistics Office/BMI.
Page 26
Industry Risk Reward Ratings

BMI's Asia Pacific IT Risk/Reward Ratings (RRR) compares the potential of a selection of the region's
markets over our forecast period, which now extends to 2018. Our Q214 ratings reflect our analyses of
macroeconomic and country risk factors that impact the IT market, as well as key market trends and
industry-specific risks such as intellectual property (IP) rights protection.
Most of the 12 countries on our table saw changes to their scores in three categories - Industry Rewards,
Country Rewards and Country Risks - of our ratings. As a result, the regional average scores for these
categories also changed, along with their respective aggregate scores and the regional average aggregate
score. The increases in the Industry Rewards and Country Rewards scores were mainly due to IT market
value and GDP per capita figures following the extension of our forecast period to 2018 and the use of
YE13 as our base year data. Despite these changes, there were only two movements on the table in this
quarter's update. The Philippines moved up two places to eighth while Indonesia dropped two places to 10th.
The relative stability of our rankings is down to two factors - the large spread between the aggregate scores
of the countries and the fact that the increases in the aggregate scores were largely proportional.
Industry Rewards
The main factors in BMI's industry rewards rating are value of the addressable IT market, our five year
growth outlook, government initiatives and IT spending as well as market depth, which assesses the
proportion of hardware sales to other IT products and services sales. South Korea and China record the
highest score of 75 in this category. This reflects the depth of South Korea's IT market, with hardware sales
accounting for around 24% of the market, and the sheer size of China's IT market, which is forecast to reach
US$148.8bn in 2014. India has the third highest score in this category owing to the size of its market and
strong government ICT initiatives aimed at sustaining the country's global competitive advantage in
software development and business processes outsourcing (BPO).
Australia is the only other country with a score above the regional average in this category. The remaining
eight countries recorded scores that were below the regional average. Despite being high-tech countries,
Singapore and Hong Kong score below the regional average owing to their relatively small populations and,
consequently, IT market values. On the other hand, Indonesia, Malaysia and the Philippines are held back in
this category by a lack of depth in the IT market.
Page 27
Country Rewards
BMI's country rewards ratings incorporates key factors that impact the sale of IT products and services in a
particularly market. These include the rate of urbanisation, GDP per capita and rate of unemployment.
There is a wide gap between the lowest score of 15 in this category and the highest score of 100. This
reflects the wide range in the figures in some of these indicators for the 12 countries in our table. For
example, China and India have populations of more than 1bn but Singapore and Honk Kong have
populations less than 10mn. Again, Australia has a GDP per capita of more than US$60,000 but this figure
is less than US$2,000 in India and Vietnam.
Singapore and Hong Kong make up for their relatively weak industry rewards scores with the maximum
score of 100 in the country rewards category. In addition to high GDP per capita (US$40,000 in Hong Kong
and US$56,000 in Singapore), both countries have 0% rural populations and high rates of IT literacy.
Australia and South Korea are not too far behind, with country rewards scores of 95 and 80 respectively.
Australia and South Korea are the only other two countries with rural population of less than 20% of the
total population.
Unsurprisingly, countries with a high proportion of rural dwellers and relatively low GDP per capita
underperform in this category. Of these countries, India, Vietnam and Sri Lanka have the lowest score of
15, compared to the regional average of score of 50. Sri Lanka has the highest rural population of 84%,
followed by India at 68%. India and Vietnam's GDP per capita were just US$1,400 and US$1,800
respectively. The other countries recorded scores around the regional average, as the high values of some
indicators were counterbalanced by scores in others.
Industry Risks
BMI's industry risk rating assesses the threat from piracy and counterfeiting of IT products as well as the
existence and level of implementation of laws to protect intellectual property (IP) rights. There is no change
to our ratings in this category this quarter, with South Korea and Singapore outperforming their regional
peers in this category with scores of 75 and 70 respectively. At the other end of our table, five countries Malaysia, Indonesia, Thailand, Sri Lanka and Vietnam - recorded the lowest score of 35. The risk of IP
right infringements is high in these countries, partly due to lax government regulation.
Page 28
Country Risks
The country risk category assesses the impact of key macroeconomic factors on the IT market. Some of the
factors we consider in our analysis include short-term external and financial risks, trade bureaucracy and
legal framework. We also incorporate Transparency International's corruption index in our ratings. The
scores in the country risk category have the narrowest range and highest average score among the four
categories in our table. Hong Kong has the highest score of 77.7, followed by Singapore on 74.4. Hong
Kong's score is boosted by its strong legal framework, transparent and efficient trade policies and a strong
corruption score.
Table: Asia Pacific IT Risk/Reward Ratings - Q2 2014
Industry
rewards
Country
rewards
Industry
risks
Country
risks
IT rating
Rank
Previous
rank
South Korea
75.0
80.0
75.0
65.4
74.5
Singapore
58.3
100.0
70.0
74.4
72.8
Hong Kong
55.0
100.0
45.0
77.7
68.9
Australia
60.0
95.0
45.0
66.9
68.0
China
75.0
35.0
45.0
55.1
58.0
Malaysia
56.7
55.0
35.0
67.7
55.6
India
71.7
15.0
45.0
50.9
50.8
Philippines
51.7
35.0
42.5
50.9
46.3
10
Thailand
55.0
20.0
35.0
62.9
45.5
Indonesia
50.0
35.0
35.0
51.4
44.8
10
Vietnam
50.0
15.0
35.0
53.7
40.3
11
11
Sri Lanka
46.7
15.0
35.0
50.9
38.3
12
12
Average
58.75
50.00
45.21
60.65
55.32
Country
Scores out of 100, with 100 highest. The IT Risk/Reward Rating comprises two sub-ratings 'Rewards' and 'Risks'. Scores
are weighted as follows: 'Rewards': 70%, of which Industry Rewards 65% and Country Rewards 35%; 'Risks': 30%, of
which Industry Risks 40% and Country Risks 60%. The 'Rewards' rating evaluates the size and growth potential of an IT
market in any given state, and country's broader economic/socio-demographic characteristics that impact the industry's
development; the 'Risks' rating evaluates industry specific dangers and those emanating from the state's political/
economic profile, based on BMI's proprietary Country Risk Ratings that could affect the realisation of anticipated returns.
Source: BMI
Page 29
Market Overview
Hardware
BMI maintains a bullish outlook for spending growth on IT hardware in 2014, as we forecast growth of
11.5% to VND49.5trn. The hardware market in Vietnam remains buoyant, with demand strengthening in
the retail sector since mid-2013, supplementing strong demand from the enterprise and public sectors.
Over the medium term BMI forecasts Vietnam's computer hardware market value will increase at a CAGR
of 11% in local currency terms 2014-2018 to reach a value of VND74.9trn. This fast rate of growth will be
driven by rising incomes, economic confidence and trends within the IT market, with the main growth
driver being the availability of affordable tablets and notebooks.
The continued run of strong economic performance

into 2014 will be supportive of increased spending
Hardware Market
on hardware. Vendors are able to tap into demand
2011-2018
from first-time buyers as incomes rise, while greater

consumer confidence is a boon for the upgrade
75M
market.
50M
This will extend the trend from 2013 when market

data from IDC show total sales of 500,000 units in
25M
school purchases booming as purchasing power rises
PC sales, VNDmn
2018f
2017f
2016f
2015f
2014f
2012
strengthened further in mid-2013, with back to
0M
2011
retail chain Vien Thong A stated that demand
2013e
Q113, an increase of 13.1% y-o-y. Meanwhile, local
Servers sales, VNDmn
in Vietnam. Other retailers such as Dienmay.com,

Phong Vu, Hoan Long and Nguyen Kim also
reported positive growth in PC sales. The segment
e/f - BMI estimate/forecast. Source: BMI.
has also been boosted by retailers partnering with

HSBC, VietinBank, ANZ and Sacombank to launch interest-free payment plans.
Government spending has remained supportive of the IT hardware market through initiatives in sectors such
as education and healthcare. It is also providing credit programs to raise household PC penetration in rural
areas, which is estimated to still be below 10%, compared with 50% in higher income urban areas. The most
potential being in rural areas where penetration is lower, however for the time-being Hanoi and Ho Chi
Minh City are thought to account for around 85% of notebook sales.
Page 30
While improved access to credit is a short-term factor boosting sales, a longer-term trend is the spread of
network infrastructure, including fixed and wireless broadband, which is boosting demand for devices for
both productivity and content consumption. Telecoms operators such as Viettel are also emerging as
significant distribution channels for notebooks as vendors seek tie-ups.
Form Factors
There is considerable potential for vendors to tap into the first-time buyer market in Vietnam as PC
ownership is still relatively limited. The latest data from the regulator, the MIC show a base of 5.5mn
installed PCs at the end of 2011, equal to individual penetration rate of 6.1%. Household PC penetration
data also reflects the low level of PC ownership in Vietnam, at 16% in 2011, and is estimated to be around
20% for the country as a whole by 2013.
Given these low penetration rates there is a sizeable opportunity for vendors in terms of the first-time buyer
market. However, with GDP per capita estimated at US$1,859 in 2013 and forecast to reach US$3,309 by
2018, the mass market is geared towards the value end of the spectrum.
With a large number of first-time buyers, consumer choice in terms of form factors is uncertain. While
productivity devices such as desktops and notebooks will remain popular for education and enterprise
purchasers, the availability of cheap tablets from China could see large numbers of consumers move straight
to tablets, and have little or no experience with more traditional form factors. There is however an
opportunity for hybrid notebook devices to capture share by offering the mobility advantages of tablets
while also meeting the broader functionality required for a sole household device.
In 2013 sales in the retail market continued to increase in the desktop, notebook and tablet segments. Tablet
growth is to be expected, coming from a low base and considering the increased availability of low cost
devices from OEMs. However the desktop and notebook market is also faring well, with IDC data for
2013 showing 20% y-o-y unit growth in desktop shipments.
There could be a boost to the desktop market from Windows upgrades in 2014 and 2015 as Microsoft
support for Windows XP is withdrawn from 2014, however the extent to which consumers replace desktops
rather than shifting to notebooks and tablets is uncertain. Windows XP still accounted for 45.7% of
Vietnamese PC browsing traffic in February 2014 according to data from Statcounter, illustrating the size of
the potential upgrade market.
Page 31
However, two factors limit the potential boost to desktop sales. First is the competition from mobile
computing, as consumers and enterprises will likely shift towards greater usage of notebooks and tablets
when upgrading. A second factor is the prevalence of pirated software in Vietnam, meaning the loss of
Microsoft support is less of a push factor.
Meanwhile, the latest data from retailers up to August 2013 indicates demand for notebooks remains strong,
with consumers opting for notebooks in the VND8-10mn range, particularly university students requiring
more advanced functionality. However they also reported that demand for low cost VND3-5mn tablets was
strong.
We believe low PC penetration is the key to continued growth momentum but migrations to Microsoft's
Windows 8 operating system are also boosting sales. In 2012 retailers claimed that many businesses and
consumers were waiting for the October release of the new OS before investing in an upgrade. The final
months of 2012 saw the release by of Windows 8 RT tablets from Acer, Asus and other vendors, priced at
around US$600. However these tablets proved unsuccessful in the face of stiff competition from low priced
Chinese tablet imports, predominantly running Google's Android OS. Local press reports have stated that
the very low price tablets are selling well and being pushed by dealers who are able to secure high margins
on the devices and still undercut the international vendors.
Page 32
Despite being a global leader in the tablet market,

Apple - unsurprisingly given its premium price
orientation - has had limited success in Vietnam
APAC Household PC Penetration

(%)
2011
where its devices are not affordable for the vast

majority of the population. However the
proliferation of affordable tablets running Android
and the entry to the market of vendors producing
Windows 8 devices is already seeing tablet sales
increase rapidly. In early 2013, reports of an influx
of own-brand Chinese made tablets indicate growth
at the low value end, but we also expect price
competition between international vendors to boost
sales of mid-range tablets in Vietnam.
A victim of the surge in tablet sales will be the

notebook market - especially netbooks. Netbooks
Source: World Economic Forum Global Information
saw a steep decline in popularity in 2011, with a
Technology Report 2013
number of leading vendors, such as former netbook

segment leader Sony, withdrawing models from the
market. Netbooks initially suffered under competition from lower priced notebooks, however tablets are
now squeezing them further.
With tablets making gains at the low end of the market the notebook category is becoming a primarily midrange device category in Vietnam as vendors are unable to compete against own brand Chinese tablets on
price. Although notebook sales are being cannibalised by tablets, with PC penetration low in Vietnam, a
large number of first time buyers are still opting for the functionality of notebooks. This has helped sustain
unit growth, in contrast to developed markets where consumers are more likely to opt of tablets as
supplementary devices to their existing desktops and notebooks.
The release of Windows 8/8.1 has also spurred the creation of hybrid devices, which had little impact in
2013 in Vietnam as early examples are priced as premium products. However price competition will reduce
the cost to consumers and hybrids are set to be a growth area in 2014. Windows has a traditional strength in
productivity use cases and software, with the OS being central to the enterprise market and Microsoft's
Office Suite ubiquitous.
Page 33
There is therefore an opportunity for vendors to leverage this strength over rival iOS and Android devices
by designing tablets with strong productivity functionality alongside the passive media consumption
features. Early examples have been hybrid devices such as Microsoft's own Surface (RT & Pro), HewlettPackard's Envy, Lenovo Miix 2 (8 inch), Lenovo IdeaPad Yoga 2 Pro, Nokia Lumia 2520, Lenovo
ThinkPad Yoga and Dell Venue 11 Pro.
Although design innovation has some way to go and prices of hybrids will need to decline, the multi-use
device has scope to capture a share of the tablet market by offering a stronger value proposition to
consumers while not compromising on user experience. Such devices, along with ultra-slim notebooks are
already regaining share of sales from tablets in more developed Asia markets in H113, for instance in South
Korea, and we believe the same phenomenon could affect Vietnam as prices decline over the medium term.
Another device category that is evolving is the ultrabook - a category of slim-line, high-spec devices with
long battery life that use Intel processors. Initial uptake after launch in 2012 was slow due to the high price
of devices, meaning limited applicability in a low income market such as Vietnam. In 2012 brands such as
HP, Asus, Acer, Sony, Lenovo and Samsung launched ultrabooks in Vietnam. However they failed to see
success in terms of unit sales due to high prices. Local press have reported that prices of low end ultrabooks
have declined in early 2013, from around VND15mn in 2012 to VND10mn which could see unit sales
grow. Local producer CMC has moved into the ultrabook market in November 2012 with low-end models.
Mid-range ultrabooks are reported to be retailing for VND20-30mn while premium models are priced over
VND30mn. The cheaper models are using lower power Intel i3 chips rather than i5 and i7 chips. Even after
these price cuts ultrabooks will be significantly more expensive than low end tablets.
Page 34
Vendor Performance
The Vietnamese PC market is surprisingly

competitive, with most of the major laptop vendor
Vietnam PC Installed Base
players having below a 10% local market share.
2008-2011
Other multinational vendors, including Dell,

Toshiba and Samsung, have enjoyed strong growth
in the market. Samsung is considered a threat as it
aims to leverage its distribution network and strong
brand recognition from the smartphone and TV
market into a 10% share of the Vietnamese notebook
PC market.
In 2013, vendors are hoping that upgrades to PC

devices based on Microsoft's new Windows 8
operating system will spur a new cycle of
procurements. The final quarter of 2012 saw the
release of a number of tablets based on Windows 8
Source: MIC
on the Vietnamese market. Acer released two

Windows 8 tablets, the Inconia Tab W700 and W511, while fellow Taiwanese leader Asus introduced its
Asus Vivo Tab. The devices were not cheap, with prices for the products being set at more than US$600.
Volumes have benefited from retailers cutting prices and cooperating with banks to offer credit to boost
sales in mid-2013. For instance Dienmay.com cut prices for notebooks from Dell, Sony and HP, as well as
enabling consumers to test and return or exchange products within 10 days. Meanwhile Nguyen Kim cut
prices on HP, Toshiba, Acer, Asus and Sony notebooks, as well as offering free accessories worth up to
VND2mn. The most important strategy for boosting sales of products from international vendors has been
cooperation with banks such as HSBC, VietinBank, ANZ and Sacombank to make interest-free credit
available.
As already noted, Asus has benefited from efforts to strengthen its distribution channel. In 2011 Asus
launched a new partnership with local company FPT Distribution, which has a nationwide network of 400
dealers. FPT, a member of FPT Trading Group, will distribute Asus products, with Asus planning to
introduce the full range of its new products in Vietnam during Q211. FTP also distributes a portfolio of
Page 35
other leading PC brands, including Dell, Lenovo and Acer. Asus, which first entered the Vietnamese market
only three years ago, is also focusing on service as a competitive differentiator. FTP will provide warranty
services for Asus laptops at its four new service centres in Hanoi, Ho Chi Minh City, Danang and Can Tho.
Asus opened service centres across Vietnam in 2011.
While foreign vendors dominate sales of notebook, local manufacturers have a strong position in the, albeit
declining, desktop market. Vietnam's top five computer companies, as selected by the Ho Chi Minh City
Computer Association in 2011, were FTP, CMS, Robo, Viettronics Tan Binh and the Khai Tri
Technology Trading Co. The total turnover of these top five companies was around VND1tn in 2011 (US
$48.1mn), down 25% from the previous year.
In November 2012 local press reported dealers were pushing cheap tablets from China as a result of the
margins they could generate on the devices. It has been reported that wholesale dealers are able to sell the
tablets for double the market price in China in Vietnam. Examples include the Hipad Mid A13 and Ondan
V971, as well as other own-brand Chinese manufacturers such as Teclast and Ampe - as well as counterfeits
of foreign products.
As in many other markets, telecoms carriers have also emerged as a significant channel option for PC
vendors. Dell has launched a partnership with Viettel, which will distribute Dell PCs. Viettel has a
substantial presence in rural areas, which have big PC market growth potential, as PC penetration is
currently low. Dell has also partnered with local retail leader The Gioi Di Dong to sell both online and
through the company's 40 retail outlets.
Software
BMI expects software sales to continue to grow rapidly in Vietnam and increase to VND6.5trn in 2014, up
16.5% from 2013. We expect strong growth will be maintained over the medium term with CAGR of 16%
2014-2018. We expect steady growth in demand for licensed software from government, enterprise and
household segments.
The Vietnamese software market is cost-sensitive, with around 75% of the market served by lower-cost
local software vendors, as well as there being a high level of pirated software. Local software dominates the
market for government and SME segments. However, larger Vietnamese companies are more likely to buy
higher-priced software from multinationals, which have around 25% of the market. Vietnamese customers
are demanding a higher level of support for software compared with a few years previously.
Page 36
Banking and finance, oil and gas, aviation and telecoms are forecast to be some of the biggest spending
software segments over BMI's five-year forecast period and are among the best opportunities for foreign
vendors. These segments offer the most potential for customised solutions, as well as off-the-shelf packaged
software. Banks are looking to take their services to the next level in response to the demands of a rapidly
growing economy and are investing in more advanced and flexible platforms for core banking processes.
Spending opportunities in the finance segment will be driven by regulatory compliance, due to regulations
such as Basel II, HIPPA and the Sarbanes-Oxley Act, as well as potential new regulations introduced in the
wake of the global financial crisis. Mobile operators are investing in new OSS (operating support systems)
to reduce costs and support delivery of new services.
Growing PC penetration, as well as new technologies and business models, including 3G mobile and
WiMAX, and industry trends such as software-as-a-service (SaaS) and open source will provide areas of
Vietnamese software market growth going forward. Most demand remains for on-premises subscription
models, due to the greater perceived security and degree of control. However, as internet infrastructure
improves in Vietnam, there should be more demand for alternative models such as SaaS and other cloud
computing services.
The government is a significant software-purchasing segment in Vietnam and accounts for about 30% of
total IT spending. The 7,000 government agencies offer considerable opportunities at national provincial
and municipal levels. A particular area of opportunity is tax agencies of all administrative tiers as
governments look to increase the efficiency of tax collection. The Vietnamese government's drive to
implement e-government will be another driver in this segment.
Page 37
Business Software
Software Market (VNDmn)

2011-2018
In 2012 and the first half of 2013 vendors reported

continued robust sales of ERP solutions, despite the
12,500,000
uncertain economic situation. There is still a lot of

potential for Vietnamese enterprises to increase
10,000,000
spending on basic solutions, including CRM and

7,500,000
security.
5,000,000
A number of Vietnamese companies embarked on

2,500,000
2018f
2017f
2016f
2015f
2014f
2012
Anh Gia Lai Group (HAGL) launched a VND100bn
0
2011
long-term growth strategy. In August 2012, Hoang
2013e
large-scale ERP implementations as part of their
ERP system as it sought to unify corporate

governance. The solution was adopted for the
e/f - BMI estimate/forecast. Source: BMI
company's four business sectors of minerals, energy,

forestry and real estate, with over 400 staff
members. HAGL said it would also consider applying the ERP solution at 20 affiliates. Imexpharm
Pharmaceuticals Co. spent US$41mn in August 2012 in installing an ERP system at its headquarters in
Dong Thap, two factories in Dong Thap and Binh Duong, as well as a distribution centre and sales branch in
Ho Chi Minh City. Other Vietnamese enterprises spending big on ERP solutions in 2012 have included
Binh Minh Plastics, which invested VND10bn in ERP, while Licogi 16 Co. has spent US$800,000 on an
SAP ERP solution.
In July 2013 FPT signed a contract to upgrade the Oracle ERP system, deploying additional Oracle
Business Intelligence Applications, for Vietnam Dairy Products (Vinamilk). The project is reported to be
worth VND15bn and includes software licences, hardware infrastructure, consultation and implementation
services.
Vendors should also look to areas such as CRM and business intelligence, where faster growth is possible,
due to untapped potential in key segments such as CRM, ERP and human resource management. Data
analytics and database software is likely to be a growing area and account for a larger portion of software
budgets. The banking and finance sector is a promising area for database software and one where foreign
companies have done well.
Page 38
Government support for ICT development should provide a framework for growing utilisation of software
in both public and private sectors. However, while the ERP market is strong, the market for CRM software
remains small, largely due to a lack of awareness about it among Vietnamese businesses. It is estimated that
only 10% of Vietnamese businesses have used CRM, which is far fewer than in other countries.
Over BMI's five-year forecast period to 2018, the Vietnamese enterprise software market will offer
opportunities in many sectors. While management software remains at less than 10% of the total software
market, basic applications such as enterprise resource planning (ERP) and accounting are finding increasing
popularity with the business market. There is a growing emphasis on cost efficiency as enterprises look to
enhance productivity through automating these and other functions.
Cloud enterprise SaaS adoption is expected to accelerate over the next few years, after pilots scheme were
deemed to have been successful. An increasing number of Vietnamese companies have shown an interest in
and willingness to use cloud services. The government has also become involved in encouraging the
development of this business model in Vietnam, and in 2010 reached an agreement with Microsoft to
cooperate on research. Given the focus on many businesses of controlling costs, the pay-on-demand SaaS
model should grow in popularity and spread beyond the initial core application area of CRM.
New cloud computing offerings and increased competition in this segment should fuel further demand from
end-users to utilise this technology. In addition to cost savings, businesses will look to boost efficiency and
improve their response to customers in order to satisfy their needs. Large businesses are most likely to put
IT applications such as mail, phone systems and document management into the cloud. However, enterprise
applications that require a high level of customisation, or those that are subject to regulatory or datasensitivity constraints, are more likely to stay on premise.
Security Software
Cyber security issues are becoming more prevalent in Vietnam as a result of greater threats and increased
awareness from enterprises, government and consumers. The government is taking steps to address the
problem, which should boost spending. In August 2013 the government announced it was investing US
$42mn in the creation of the National Centre for Network Security Technology. The centre will be managed
by the Ministry of Public Security, the Government Secrecy Committee and the Ministry of Industry and
Trade. The government also update the Law on Information Security, which closed for public comment in
July 2013, as it looks to improve the cyber security environment including combating attacks originating in
Vietnam.
Page 39
In March 2013 the Vietnamese government's draft law on digital information security stated that there
would be stronger support for domestic firms producing information security products. The Vietnam
Computer Emergency Response Team (VNCERT) stated that in order to ensure information security and
protect national digital sovereignty domestic products should achieve a 50% share of the market. VNCERT
called for tax incentives for domestic firms to assist them in a competitive global marketplace against
vendors such as Symnatec, Kaspesky, McAfee, Trend Micro, Bit Defender and Aviram.
A survey by internet security company Bkav in April 2013 estimated that the losses incurred by viruses ran
to VND8trn annually in 2012. This was calculated by the disruption to work caused by the presence of
viruses. The survey also highlighted an increase in attacks of company websites in Vietnam, with 425 in
March 2013, nine originating from Vietnam and 416 from foreign countries. This level of disruption is
generating renewed interest in security software and solutions, however vendors will face the same
challenges of price sensitivity and piracy as elsewhere in the software market.
BKAV, along with CMC, the most prominent domestic cyber security firm in Vietnam, reported that less
than 50% of computers in Vietnam have anti-virus installed in H113. Despite the scale of the opportunity
from low penetration BKAV stated that the market is less dynamic than 3-4 years previously when a large
number of international vendors moved into the market. This was attributed to the reluctance of local
enterprises and consumers to spend on copyrighted software, preferring free software or no protection.
Page 40
Migrations to the Windows 8/8.1 operating system

were sluggish in Vietnam in 2013, unsurprising
given the price sensitivity of consumers. However
Vietnam PC Browsing Traffic By

OS (%) And Y-o-Y Change
February 2014
there are signs the OS began to gain traction

throughout the year as a wider array of touch
enabled hybrid notebooks hit the market. By
February 2014 Windows 8/8.1 accounted for 7.2%
of PC browsing traffic in Vietnam, up 4.6pps y-o-y.
This was the single largest increase of any OS and
made it the third largest by browsing traffic share.
While the outlook is improving, an drag on uptake is

the greater longevity of hardware in recent years,
and the strength of Windows 7 meaning the push
factor for upgrades in the short term is limited.
However, there will be a medium term impact
through a deepening of the tablet market and
Source: Statcounter
innovation in form factors as Microsoft introduced

touchscreen capabilities to Windows 8.
Another medium term factor that should drive upgrades is the fact that a large portion of the installed
computer base in Vietnam that still uses the Windows XP operating system. As support for Windows XP
will be withdrawn in 2014, this should provide an impetus to upgrade. The latest Statcounter data show that
XP still accounted for 45.7% of PC browsing traffic in Vietnam in February 2014, narrowly ahead of
Windows 7 on 38.9%. Microsoft will still offer reduced support for XP until 2015, but hardware
manufacturers started to wind down their support in 2013. This will be a key factor that should drive
business upgrade.
In spring 2012, Microsoft targeted the consumer segment with a major 'Buying Microsoft computers'
campaign, which offered various gifts to customers purchasing computers with legitimate Windows 7
versions installed. The promotion ran from February through April in big cities across Vietnam, including
Hanoi, Ho Chi Minh City, Danang, Hailphong and Can Tho.
Microsoft is dominant in the operating system segment but faces a challenge from Chinese vendor
KingSoft. The economic downturn may have added to the forces driving interest in open source software.
Page 41
The economic downturn has led businesses and customers to look more closely at open office-type open
source software, due to its perceived lower cost and access to codes, as well as free services, such as Google
Docs, which are funded by advertising. However, a key issue and precondition for the more widespread
adoption of open source will be the development of a support infrastructure. Given the current economic
climate, IT directors will need to justify any upgrade in terms of cost savings.
Open Source
The global economic downturn may have added to the forces driving interest in open-source software due to
its perceived lower cost and access to codes. The economic downturn has led businesses and customers to
look more closely at open-office-type open-source software, as well as free services such as Google Docs,
which are funded by advertising. Once again, a key issue and precondition for the more widespread
adoption of open source will be the development of a support infrastructure.
Ho-Chi Minh City (HCMC) plans to spend VND31bn to use open source software in 2013, primarily for the
city's state agencies. To put this figure in perspective HCMC will spend VND240bn on software licenses
for state agencies and VND800bn on licences for business and social organisations in 2013. However
HCMC plans to continue shifting spending towards cheaper open source alternatives. In order to rival major
international software firms, open source implementers in Vietnam are creating alliances to be able to
compete on scale in terms of finance and labour.
In March 2013 the development of open source software for the public sector received a blow when Vu Duy
Loi, Director of the Communist Party Central Committee Office's Informatics Center, stated that the
government was freezing the adoption of open source software. He cited the lack of available technical
maintenance staff for making the deployment of services impractical for the time being. However, the
government has not permanently abandoned open source software deployments and is looking at means to
increase the number of staff.
Piracy
Vietnam's software market is developing but piracy remains a drag on the market at 80% in 2012, according
to a press release from the BSA. While high, the piracy rate of 81% in 2011 did represent a drop of 4pps
compared with the 85% seen in 2010 and 95% as recently as 2007. This has at least enabled Vietnam to
escape the list of the top 10 countries for software copyright infringement. However the piracy rate remains
above that of neighbouring markets such as India, Thailand and China.
Page 42
In March 2013 the Copyright Office of Vietnam reported that software piracy was continuing to decline, but
remains a serious issue. The software piracy rate has declined from 90% to 80% from 2004 to 2011, with a
4pps decline from 2010 to 2011 alone. The government states that it has signed copyright agreements with a
range of software firms, but private enterprises remain copyright infringers, particularly computer trading
firms. In 2012, inspectors discovered 10 computer sales agents of leading brands such as HP, Dell, Lenovo
and Acer installing pirated software products. According to estimates, the value of the seized software
products was around VND1bn.
In January 2013 local authorities reported that piracy rates were as high at firms with foreign investment as
domestic firms, including those that were wholly foreign owned. Looking ahead, Vietnam is targeting a
software piracy rate of 55% - the regional average for South East Asia.
In June 2013 inspectors from the Ministry of Culture Sports And Tourism, High-tech Crime Polic and
General Department of Anti-Crime Policy raided two PC retailers/exporters and found large numbers of
PCs with illegal software pre-loaded. The most common illegally installed software was Microsoft
Windows 7 and Microsoft Office, while software such as Adobe Photoshop, AutoCAD and Symnatec's
antivirus were also found on devices. The total value of illegal software was estimated at VND7bn (US
$33,000).
The government has also moved to tighten enforcement of copyright regulations. Decree 47.2007.NP-CP,
which became effective in 2009, allows for a penalty of up to VND500mn (around US$28,000) for
instances of software piracy. In 2010, it was announced that Bach Khoa Internet Security Centre (or BKIS)
and Lac Viet Computer Joint Stock Co had become the first Vietnamese firms to join the Business Software
Alliance, a global software industry association that focuses on copyright issues.
In November 2011, the government provided a boost to legal software usage by signing an extension of a
deal with Microsoft to purchase licensed software for government organisations. The original 2007
agreement had covered all 63 provincial authorities, 24 ministries and enterprises where the state has a stake
of over 50%.
Page 43
APAC Piracy Rate (%)*

2011
*those responding that they always, mostly, occasionally, or rarely use pirated software. Source: BSA Global Piracy Survey 2011.
Vendor Performance
Local companies have a particularly strong position in the government and SME segments, while foreign
and larger Vietnamese corporations are more likely to consider more expensive software from
multinationals. Some larger Vietnamese software companies such as Hai Hoa have enjoyed some successes
with foreign companies. However, other local companies have reported that it is sometimes a challenge for
them to meet even government requirements. Software piracy is an issue for both domestic and
multinational companies. Lac Viet Company, vendor of popular dictionary software, has estimated annual
losses to piracy of around VND58bn.
The government's plans to expand the local software industry, and develop a number of new software bases,
as well as two new software businesses with revenues of more than US$200mn, could potentially have an
impact on the local software competitive landscape. The Ministry of Information and Communications
(MOCI), which developed the plans, has also called for the localisation of some open source software
products for use in state agencies.
Page 44
The Vietnamese enterprise software market is competitive with local companies having a significant share
of the market. Major global players such as SAP, Oracle, IBM and Microsoft have a local presence but
face competition from cheaper local rivals such as CMC Joint Stock Corporation (CMC), MISA, FAST
and Exact Software, as well as from Chinese rivals. Similarly in the security software segment, US
suppliers Symantec and McAfee have had successes, but face competition from popular Vietnamese antivirus programs such as BKIS.
SAP has formed a strategic partnership with leading Vietnamese software venture CMC. The two partners
aim to develop the major enterprise market together with CMC becoming SAP's strategic partner for
consulting and implementing SAP solutions. The main target will be large companies, including in the
finance sector. CMC is one of Vietnam's largest software companies and is active in the IT, telecoms and ebusiness segments with an annual growth averaging at least 30%.
SAP's biggest global rival, US vendor Oracle, has performed strongly in the Asia Pacific (excluding Japan)
region during the recent financial crisis. According to the company, it managed to increase its market share
in the region. In Vietnam, the company has made strong inroads into the banking sector, where it claims to
have more than 15 customers, including banks such as Dong A Bank, Hubu Bank, Ocean Bank, Nam A
Bank and Tien Phong Bank. Mid-sized bank Vietnam Asia Commercial (VietA) Bank, which is based in
HCMC and has 15 main branches and 47 sub-branches, announced that it was migrating to an Oracle
FLEXCUBE solution to cover all of its operations.
Other multinational vendors are also targeting promising enterprise sectors. In 2011, Norway-headquartered
software company Conexus started the search for a partner to enter the Vietnam market, as a launching pad
for the South East Asian region. French software vendor Dassult Systemes has already entered into a
strategy cooperation agreement with domestic sector player FPT. The two will develop products to target
Vietnam's telecoms and banking sectors. Real Estate is another growth area, and Microsoft's wins in this
sector have included a VDN3bn contract for its Dynamics CRM solution from Sacombank Real Estate, an
affiliate of Saigon Thuong Tin Commercial Bank.
While many foreign vendors have found richest pickings in the corporate sector, some are increasingly
targeting Vietnamese SMEs. Epicor Software Corporation, a leading provider of ERP solutions in Asia,
has set up a strategic alliance with the Vietnamese subsidiary of US-based DiCentral Group to expand its
presence in Vietnam. Epicor provides DiCentral with technical and marketing assistance as the company
promotes its ERP solutions to local firms, with a focus on solutions for plastics manufacturing and
consumer packaged goods, as well as the hotel and property management segment.
Page 45
An increasing number of Vietnamese companies have shown an interest in and willingness to use cloud
services, which are perceived by vendors as an emerging opportunity. In 2012, Microsoft launched its
Office 365 Small Business Premium solution on the market, which is designed for small businesses.
Microsoft said that it foresaw rapid development of cloud computing services in Vietnam, especially for
SMEs and in 2012 the company also launched a Vietnamese website focused on cloud services for this
segment. In 2010, FPT and Microsoft had reached an agreement on cooperation to research opportunities
for cloud computing in Vietnam. The partners will also launch commercial pilots. IBM is promoting cloud
computing as a cost-effective way for Vietnamese SMEs to realise efficiencies through IT utilisation. Key
prospects are seen as being enterprises in the finance and banking, insurance and retail sectors.
The main enterprise software vendors are increasingly focused on the SME segment, rolling out a
succession of product lines and software packages previously only available to larger companies. New
releases were tailored to SMEs' smaller budgets and particular organisational needs.
Page 46
Services
BMI believes the IT services segment will be the outperforming area of the IT market over the medium
term. Spending is forecast to reach VND14.2trn in 2014, up 17.3% from VND12.1trn in 2013. We forecast
strong growth will continue over the medium term with a sectoral CAGR of 16.5% 2014-2018, with the
value of the market forecast to reach VND26.0trn in 2018. The growth of Vietnam as a destination of
business process and software development outsourcing will be a strong driver over the medium term.
As well as growth in outsourcing, over the past few
IT Services Market
years, the size of IT services deals has increased in
2011-2018
key IT spending verticals. The government has

launched a number of major projects in cities like
30M
HCMC, Hanoi and Danang, which will boost public

sector spending. Growing broadband penetration in
10
20M
rural and remote areas will also fuel the market's

development.
10M
the domestic IT services market had strong growth
2018f
2017f
2016f
2015f
2014f
Communication (MIC) in August 2013 found that
2012
0M
2011
Research by the Ministry of Information and
2013e
IT Services sales, VNDmn (LHS)

Cloud computing spending, % of IT market (RHS)
potential, while outsourcing demand is also

projected to grow rapidly. The MIC identified
system integration and development, and especially
e/f - BMI estimate/forecast. Source: BMI.
data services, as the fastest growth areas. Domestic

firms are facing a sharp increase in data, primarily
generated by information on the internet, meaning they are seeking services from the simple (migration to
new systems) to more complex demand such as business intelligence. Looking further ahead, the MIC
expected infrastructure leasing, training, consultancy, website development, e-commerce, app development
and data services would be the services in highest demand.
Growing demand for digital infrastructure projects in segments such as banking, telecoms, energy and
government has attracted global IT services leaders such as IBM to invest more in Vietnam. Large local
organisations such as the Corporation for Financing and Promoting Technology (FPT) have also targeted
this opportunity and announced plans to compete with established multinational vendors and offer highquality outsourcing services.
Page 47
Bottlenecks To Development
The IT service market has been growing rapidly in Vietnam, and domestic firms are becoming increasingly
important players in the regional and global market. However there are still impediments to market
expansion. One area is cyber security, where the government is working to strengthen domestic
infrastructure and give reassurance to firms looking to outsource to Vietnamese companies.
Another is the country's legal framework, with the IT sector regulated by the 2006 Information Technology
Law, and contains general provisions for IT services. With the fast-moving nature of the IT services market
investors have complained that the law is out of date and some types of IT services are not legalised,
reducing certainty and impeding long term planning.
However the government has been making some progress in recent years and the Ministry of Information
and Communications regulates operational requirements and procedures for firms providing IT services,
with new guidelines introduced in 2010 after the government authority pointed to a lack of regulations for
businesses providing IT services, consulting or security services. In March 2013 Nguyen Trong Duong, the
director of the Information Technology Department of the Ministry of Information and Communication,
stated that only around 3% companies in Vietnam have ISO/IEC 27001:2005 certificates for information
security. The certificates are important for IT firms, business and institutions applying IT solutions. So far
only banks, finance and data centres have focused on information security certificates. According to Duong
the primary barrier to achieving information security certificates has been the fee required, as well as the
requirement that all software must have licences for a firm to be eligible (with piracy prevalent). The
government is offering a total disbursement of VND20bn for firms obtaining ISO27001 certificates for
information security.
Vietnam also suffers from a shortage of trained IT workers, with some estimating that Vietnam would need
an additional 1mn IT engineers in order to achieve the government's ambitious targets for the domestic
software and IT services sector. Lack of language skills and patchy ICT infrastructure are other barriers, and
this situation represent an opportunity for external service providers and trainers.
In February 2013 the Vietnamese government was considering setting up new IT skills standards to bring
up the skill level of IT engineers to international levels. The government wants to see 1mn IT engineers
working in the industry by 2020. The government considers the lack of international standard qualified
engineers to be a bottleneck for the continued development of the IT sector.
Page 48
In June 2013, Le Truong Tung, head of the FPT University in HCM City, predicted that the there could be a
shortage of skilled IT staff by 2014 due to a declining number of students training in IT. Tung reported that
the number of students applying to study IT as a major has dropped 10-15% each year from the highs of
2008.
Outsourcing
Vietnam is already a top Asian destination for outsourcing such as ITO and BPO, along with India, China,
Singapore, the Philippines and Thailand. However there remains strong growth potential for outsourcing
due to improving ICT infrastructure and international bandwidth, as well as government targets for growth
of the domestic IT services and software sector. The government's drive to create a significant IT services
industry in Vietnam over the next 15-20 years is expected to be a significant factor shaping this opportunity
by expanding BPO, as well as moving into higher value opportunities such as software development.
Growing numbers of foreign firms are now using Vietnam as an outsourcing alternative to India and China.
Vietnam was found to be the second largest outsourcing location for Japanese firms after India in a survey
by Nikkei Computer. In January 2013 the Information Technology Promotion Agency survey of 1,100
Japanese IT firms showed Vietnam was the leading outsourcing destination with 31.5% of firms choosing it,
ahead of India (20.6%), China (16.7%), Thailand (9.7%) and Philippines (7.4%). The report also stated that
Vietnam had service fees that were 30% lower than China. However 75-80% of the outsourcing contract
value still goes to Chinese firms, with Vietnam estimated to account for 5%. The data indicate that Vietnam
is set to see strong growth as firms pursue their interest in the market and move business away from China.
Relocation by Japanese firms would also provide momentum and enable Vietnamese outsourcing firms to
diversify geographically.
In May 2013, AT Kearney reported that in 2012 Vietnam occupied eighth position for software testing
outsourcing destinations. In 2012, Vietnamese firms won major contracts from Japan and the US due to its
cost advantages, however it continues to face stiff competition from China and India which have a greater
number of software engineers for testing.
In March 2013, Global Cyber Soft (GCS), a software firm based in Quang Trung Software Park,
announced a new outsourcing contract from a satellite telecom network in the US. GCS has been expanding
into new markets following initial success with Japanese firms, particularly in automation projects. It has
benefited most from demand from the healthcare and telecoms sectors but in 2013 GCS is also expecting
demand to grow from the insurance sector. In order to meet growing international demand GCS is opening a
second development centre in Da Nang.
Page 49
TMA Solutions, another major outsourcing firm, has also been expanding internationally. It has 1,200
engineers and is targeting 20% growth in 2013. FPT Software has also stated ambitious targets for 2013,
increasing revenue from US$81mn in 2012 to US$100mn in 2013. It is the biggest software firm in
Vietnam with 4,000 engineers, and plans to hire a further 1,500 in 2013. In March 2013, FPT formed a joint
venture (JV) for business process outsourcing (BPO) with Japan's Agrex, which has been touted as the first
BPO JV in ASEAN. Both companies invested in the creation of F-Agrex, which will begin operations in
July 2013. F-Agrex will initially target the Japanese outsourcing market, before expanding globally. Staff at
launch will number 100 but the JV is targeting growth to 500 staff by 2015. Foreign owned firms have also
performed well, such as KMS, which specialises in outsourcing services for the US and operates in three
sectors - healthcare, e-commerce and online training.
Cloud Computing
One potential demand driver will be organisations looking for help with to utilise efficiencies from cloud
computing such as SaaS and Infrastructure-as-a-Service. BMI forecasts that the cloud market will achieve
growth of 300-400% over our five-year forecast period. Various government organisations, including the
Ministry of Education and Training (MOET), have started using cloud services as a way of cutting costs.
Other areas of opportunity for cloud computing include banking and retailing, as organisations in those
fields look to enhance efficiency and save money on hardware investments.
More investment in local call centres will generate spending on IT hardware, software and services, and be
another source of opportunities for IT vendors. In 2010, Japanese company Moshi Moshi established
MOCAP Vietnam Joint Stock Company in partnership with a Vietnamese company to provide call centre
services for the Vietnamese market. MOCAP Vietnam was claimed to be the first outsourcing company
established with Japanese backing in Vietnam. Economic growth and rising spending power should attract
new entrants to this segment.
Vendor Performance
According to Vietnam's Ministry of Information and Communications (MIC), the country has around
10,000 firms licensed to provide IT services. However, only a third are actually operating. The MIC is
developing a draft decree to map out policies to help the IT industry grow in the future. Measures to
eliminate firms that had been previously licensed to provide IT services, but were for whatever reason not
actually doing so, will be included in the decree. The decree will also stipulate procedures and operational
requirements for firms providing IT services.
Page 50
Local software producers are increasingly offering software development and outsourcing services as
Vietnam's government targets a larger share of the global outsourcing opportunity. Vietnamese companies
have a particularly strong Japanese client base for these types of services. According to the Vietnam-Japan
IT cooperation club, Vietnam ranks third after China and India for IT and software outsourcing services to
Japanese organisations, with a 0.5% market share.
However, the major US IT vendors also have a solid presence in the market. In July 2012, IBM won a
contract from Vietnam's Orient & Commercial Bank (OCB) to implement its analytics solutions. The
OCB is looking to install a new customer-centric approach as it transitions from a multifunction to a retail
bank. Growing demand from Vietnam's citizens for new banking products has created the need for the
country's banks to process growing volumes of data.
In January 2013 Vietnam's University of Technology (UIT) awarded an IT systems supply contract to US
technology services firm IBM. The agreement will see the university make use of the US company's
PureSystems package in order to create its own cloud platform and 'virtual campus', PR Newswire reports.
The organisations have also signed a second agreement with the aim of encouraging and providing IT
education in the country.
The largest Vietnamese software company, FPT, offers software custom development and outsourcing
services to foreign companies and earns 56% of its revenues from Japan. In 2011, the company unveiled a
major new restructuring plan that will consolidate five technology subsidiaries in a search for higher
growth. The company's five subsidiaries - FPT Information System; FPT Telecom Corp; FPT Software;
FPT Online and FPT Trading Group - will be merged, with the company either buying out minority
shareholders or facilitating a share swap.
FPT is focused on expansion through adding to its network of partners. The company is looking to stake a
position in the small, but emerging cloud computing opportunity and in May 2011 announced a cloudcomputing alliance with Microsoft. FPT's wins in this area have included a US$2mn outsourcing contract to
develop core retail and e-commerce software for Nissen Co.
Japanese companies are also involved as players in Vietnam's developing outsourcing sector. In 2010,
Japanese companies Mitsui and Co and Moshi Moshi Hotline Inc jointly established MOCAP Vietnam
Joint Stock Company (MOCAP Vietnam) in Hanoi in partnership with a local company. The new
company said that this was the first Japanese-founded call centre outsourcing company to be founded in
Vietnam.
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Industry Trends And Developments

Outsourcing Boom
Vietnam was the second largest outsourcing location for Japanese firms after India in a survey by Nikkei
Computer. In January 2013, an Information Technology Promotion Agency survey of 1,100 Japanese IT
firms showed Vietnam was the leading choice of outsourcing destination with 31.5% of firms choosing it,
ahead of India (20.6%), China (16.7%), Thailand (9.7%) and Philippines (7.4%). The report also stated
Vietnam's service fees are 30% lower than China. However 75-80% of the outsourcing contract value still
goes to Chinese firms, with Vietnam estimated to account for 5%. The data indicates Vietnam is set to see
strong growth as firms pursue their interest in the market and move business away from China to cut costs.
In May 2013, AT Kearney reported that Vietnam occupied eighth position for software testing outsourcing
destinations in 2012. Vietnamese firms won major contracts from Japan and the US due to its cost
advantages. However it continues to face stiff competition from China and India which have a greater
number of software engineers for testing.
In March 2013 Global Cyber Soft (GCS) a software firm based in Quang Trung Software Park announced
a new outsourcing contract from a satellite telecom network in the US. GCS has been expanding into new
markets following initial success with Japanese firms, particularly in automation projects, which it expects
to continue in 2013. It has benefited most from demand from the healthcare and telecoms sectors but in
2013 GCS is also expecting demand to grow from the insurance sector. In order to meet growing
international demand GCS is opening a second development centre in Da Nang.
TMA Solutions, another major outsourcing firm, has also been expanding internationally. It has 1,200
engineers and is targeting 20% growth in 2013. FPT Software has also stated ambitious targets for 2013,
increasing revenue from US$81mn in 2012 to US$100mn in 2013. It is the biggest software firm in
Vietnam with 4,000 engineers, and plans to hire a further 1,500 in 2013. It has also set up TMA Japan
Center (TJC) which is in charge of developing the Japanese market. TJC plans to employ 500 engineers in
the next three years instead of 150 as currently. Foreign-owned firms have also performed well, such as
KMS, which specialises in outsourcing services for the US and operates in three sectors - healthcare, ecommerce and online training.
There is however downside to the Vietnamese software boom due to two factors, first the bottleneck of a
lack of local talent, a feature that has been exacerbated by the move from Japanese firms to recruit local
Page 52
talent with the promise of higher pay. The second factor dragging on continued development is the
depreciation of the Japanese Yen, making Vietnamese outsourced services less attractive financially. This is
of great significance as Japan is the biggest market for Vietnamese software outsourcing firms, accounting
for about 40 percent of revenue and 30 percent of profit.
Chinese Tablets Flooding The Market
In November 2012 local press reported Vietnamese PC dealers were pushing cheap tablets from China as a
result of the margins they could generate on the devices. It has been reported that wholesale dealers are able
to sell the tablets for double the market price in China in Vietnam. Examples include the Hipad Mid A13
and Ondan V971, as well as other own-brand Chinese manufacturers such as Teclast and Ampe - as well
as counterfeits of foreign products. This increase in low-price tablets could be detrimental to other PC sales,
particularly low cost notebooks.
Ultrabook Price Declines
In 2012 brands such as HP, Asus, Acer, Sony, Lenovo and Samsung launched ultrabooks in Vietnam.
However they failed to see success in terms of unit sales due to high prices. Local press have reported that
prices of low end ultrabooks have declined in early 2013, from around VND15mn in 2012 to VND10mn.
Local producer CMC has moved into the Ultrabook market in November 2012 with low-end models. Midrange Ultrabooks are reported to be retailing for VND20-30mn while premium models are priced over
VND30mn. The cheaper models are using lower power Intel i3 chips rather than i5 and i7 chips.
Hi-Tech Parks
In March 2013 the chairman of the Ho-Chi Minh City (HCMC) People's Committee said the board of the
Saigon Hi-Tech Park (SHTP) should establish a mechanism to attract foreign capital. The HCMC
government approved the second phase of SHTP development in 2012, which will see investment of
VND8trn by 2020 for functions such as traffic, water drainage, water and electricity supply. The
government has stated the SHTP must accelerate the development of infrastructure in order to attract
investors, especially technology firms. It is considering approval for private capital to be used in developing
SHTP infrastructure. So far, ten investors have registered to invest in the project, with combined capital of
VND111mn, 69.5% of the SHTP target.
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Quang Trung Software City
Quang Trung Software City Development Company, which operates Quang Trung Software City (QTSC)
in HCMC, reported that it did not meet its targets for 2012. It did however achieve some successes such as
winning a software project from Hewlett Packard and attracting KDDI, a leading Japanese telecoms
operator, to set up in QTSC. Despite underperformance in 2012, which was attributed to global economic
conditions, there are plans to create a second park after QTSC has been operational for 12 years.
HCM City Increases IT Investment
In April 2013 the Ho-Chi Minh City authority announced plans to spend VND300bn (US$14.3mn) on
developing e-government capacity. It will also focus on replacing out of date hardware and improving
network security in 2013. An additional feature is the authority's intention to work with local small and
medium IT enterprises where possible, rather than immediately turning to large IT vendors. Spending in
2013 is a marked increase over 2005-2012 when the city authority carried out 1,012 projects with a total
spend of VND665bn. This investment was used to develop IT infrastructure including hardware, software,
databases and staff training in 64 departments and agencies.
IT Worker Demand Booming, Potential For Labour Constraints By 2014
In June 2013 Le Truong Tung, head of the FPT University in HCM City, predicted that the there could be a
shortage of skilled IT staff by 2014 due to a declining number of students training in IT. Tung reported that
the number of students applying to study IT as a major has dropped 10-15% each year from the highs of
2008.
Open Source Development Opportunity
HCMC plans to spend VND31bn to use open source software in 2013, primarily for the city's state
agencies. To put this figure in perspective HCMC will spend VND240bn on software licences for state
agencies and VND800bn on licences for business and social organisations in 2013. However HCMC plans
to continue shifting spending towards cheaper open source alternatives. In order to rival major international
software firms, open source implementers in Vietnam are creating alliances to be able to compete on scale
in terms of finance and labour.
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Microchip Market Growth Forecast
The HCMC People's Committee approved a program to grow the microchip manufacturing industry by 30%
a year through to 2020. Under the program, five leading international companies will invest in HCMC,
forming 25 local companies. The program will see a full value chain for microchip construction developed,
including training, design, manufacture, marketing and sale. One investor is the Sai Gon Industry
Corporation, which is constructing a microchip plant for local demand and export across Asia. The plant
will produce 1.8bn microchips per year.
Page 55
Regulatory Development
Table: Government Authority
Ministry of Information And Communications (MIC)
Minister: Nguyen Bac Son
Source: BMI
The Ministry of Information and Communications of the Socialist Republic of Vietnam is the state
administration in charge of policymaking and regulatory matters in posts, telecommunications, information
technology, electronics, internet, radio transmission and emission techniques, radio frequency management
and national information infrastructure, and management of public services. It also has control over, on
behalf of government and as stipulated by laws and regulations, the state capital in posts,
telecommunications and information technology enterprises. Its main functions include:
submitting to the government drafts of laws, ordinances, regulations, strategies and development plans on
posts, telecommunications and information technology;
giving guidance in implementation of laws, ordinances and regulations, as well as development strategies
and plans related to posts, telecommunications and information technology;
regulating the electronics and information technology industry development plan;
regulating the quality of posts, telecommunications and information technology networks, plants,
products and services;
conducting international cooperation activities in posts, telecommunications and information technology;

and as stipulated by law.
Assign and organise to implement regulations in fields of copyright and intellectual property right
regarding press, publications, information technology services, related inventions; and
Take actions to protect organisations, individuals in the fields of copyright and intellectual property right,
inspecting all activities and settling all regulatory breaches in the fields of its legal functions.
IT Plan
In 2012, the Vietnamese government unveiled ambitious plans for developing the country's IT industry.
According to a draft plan released in May 2012 by the Information Technology Department of Vietnam's
Ministry of Information and Communications, the government has pledged to invest VND2.4trn
(US4115mn) from the State Budget in the ICT sector by 2020.
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In August 2013 a draft resolution from the Ministry of Information and Communications proposed
allocating at least 2% of the state budget for boosting the IT sector each year. The fund will be used to help
Vietnam catch up with regional rivals and move up the value chain in areas such as outsourcing and
software development. In addition, the Ministry argue that the development of the IT sector would make a
positive contribution overall through modernisation of other industries - thereby improving international
competitiveness.
The plan will focus on six 'pillars', namely improving the policy environment, developing IT human
resources, developing IT enterprises and trademarks, products and markets, attracting investment to build IT
zones and open source software. In the preceding decade (2001-2010), the IT sector achieved average
annual growth rates of 20-25%. In 2011, the industry's revenues were reported to be more than US$8.5bn,
up 15% y-o-y. Revenues from hardware and electronics accounted for 74% of the total, reaching US$6.3bn,
up nearly 12% y-o-y. Revenues are projected to reach between US$17bn and US$19bn in 2015. The
industry is targeted to contribute 8-10% to the national GDP by 2020.
The government hopes to attract US$5bn of foreign investment into the IT industry by 2015. The
government's campaign to attract more foreign IT companies to invest in Vietnam received a boost in 2011
with the announcement that HP would set up a wholly owned firm in Vietnam. The government plans to
continue to revise tax structures in order to incentivise both foreign investors and local producers. Separate
funds will also be allocated to support IT human resource development and IT development.
However, there are fears that inconsistent government policies on subsidies and tax breaks for inward
investment in the IT sector have caused Vietnam to become less attractive as a destination for such
investment compared with China or India. For example, the government has revised the tax rate on revenues
from digital services to 10% in 2012, from 0%, causing dismay among companies in the sector.
The government's plans, which state a revenues target for the ICT sector of between US$17bn and US$19bn
over our five-year forecast period, include major investments to develop production centres in software,
services, hardware and electronics. Revenues are projected at US$2bn from software sales, US$12.5bn from
hardware, US$2bn from digital content and US$1.5bn from IT services.
To achieve these targets, the government will drive the development of three production centres for
software, services and digital content. These are, respectively, Ho Chi Minh City, with projected revenues
of US$3bn by 2015; Hanoi, with US$1.8bn; and Danang, with revenues of US$300mn. Three regions will
be established in Hanoi, Hai Duong, Bac Ninh and Vinh Thien Hue provinces, with revenues targets of US
$5bn, US$6bn and US$700bn respectively by 2015.
Page 57
Other components of the plan include the creation of two hardware and electronics companies with average
annual revenues of more than US$2bn and two software businesses with average revenues of more than US
$200mn. Some 50,000 IT engineers are to be trained and become proficient in foreign languages.
Government IT Strategy
The government's Strategy for IT Development covers the 2010-2020 period and focuses on four major
areas: enhancing IT application, developing the local IT industry, developing ICT infrastructure and
developing IT HR. Key opportunities for IT vendors involve the development utilisation of IT applications.
Major threads here include building and developing e-citizens and building e-government and e-business, as
well as developing transactions and e-commerce.
A number of specific IT plans have been developed, including one to modernise IT in government agencies,
which was first approved in March 2009. In an April 2010 cabinet meeting, Prime Minister Nguyen Tan
Dung ordered all members of his cabinet to use computers while working. New government departments
continued to go online in 2010, with the Ministry of Agriculture and Rural Development launching its eportal in February 2010.
Other government ICT projects have included a plan to modernise the customs department in 2005-2010
and a Tax Administration Modernisation Plan for the 2008-2013 period. Other plans include developing the
internet in rural communities (2008-2013) and developing the Vietnamese IT industry. The plans all have
regional versions, focused on the central, south and northern regions.
In November 2013 it was reported that the Vietnam government was set to spend US$400,000 on building
its own version of California's Silicon Valley for startups. The project, organised by the government, will
see two accelerators set up in Hanoi and Ho Chi Minh city. The government hopes the development will
help mature emerging technology companies in the country and link them with suitable venture capital.
Government Cloud
Various government departments have started to utilise cloud services, with a major objective being to
make cost savings and enhance resource efficiency. In 2011 the MOET instructed local education and
training departments to shift to cloud computing. The ministry views the cloud model as suitable for the
education sector and with the potential to have significant cost benefits. The Ministry of Natural Resources
and the Environment claimed to have realised 20% investment cost savings after an initial period of
Page 58
virtualising IT infrastructure. The ministry has now put in place a strategy for more utilisation of cloud
computing in IT applications and is putting in place standards and policies to enable this.
Cyber Security
Vietnam faces serious cyber security threats, which are a particular problem as it looks to promote the
outsourcing and software development industries. In August 2013 it was reported that the government was
investing US$42mn in the creation of the National Centre for Network Security Technology. The centre
will be managed by the Ministry of Public Security, the Government Secrecy Committee and the Ministry
of Industry and Trade. The government also updated the Law on Information Security, which closed for
public comment in July 2013, as it looks to improve the cyber security environment including combating
attacks originating in Vietnam.
Regulatory News
MIC Enters Into MoU With Microsoft
The Ministry of Information and Communication and Microsoft Corporation entered into a memorandum of
understanding (MoU) to form a long-term partnership in March 2014. The ministry and Microsoft will work
together on cloud apps development, IT education and cyber security. Microsoft has entered into another
MoU with the Vietnam Computing Emergency Response Team (VNCERT, under which Microsoft and
VNCERT will work collaboratively on cyber security.
IT Education Standards
In February 2013 the government of Vietnam is considering setting up new IT skills standards to bring up
the skill level of IT engineers to international levels. The government wants to see 1mn IT engineers
working in the industry by 2020 and considers the lack of international standard qualified engineers to be a
bottleneck for the continued development of the IT sector.
Software Piracy
In March 2013 the Copyright Office of Vietnam reported that software piracy was declining, but remains a
serious issue. The software piracy rate has declined from 90% to 80% from 2004 to 2011, with a 2pps
decline from 2010 to 2011 alone. The government stated that it had signed copyright agreements with a
range of software firms, but private enterprises remain copyright infringers, particularly computer trading
Page 59
firms. In January 2013 local authorities reported that piracy rates were as high at firms with foreign
investment as domestic firms, including those that were wholly foreign owned. Vietnam is targeting a
software piracy rate of 55% - the regional average for South East Asia.
In June 2013, inspectors from the Ministry of Culture Sports And Tourism, High-tech Crime Police and
General Department of Anti-Crime Policy raided two PC retailers/exporters and found large numbers of
PCs with illegal software pre-loaded. The most common illegally installed software was Microsoft
Windows 7 and Microsoft Office, while software such as Adobe Photoshop, AutoCAD and Symnatec's
antivirus were also found on devices. The total value of illegal software was estimated at VND7bn (US
$33,000).
Software Security Certification Drive
In March 2013 Nguyen Trong Duong, the director of the Information Technology Department of the
Ministry of Information and Communication, stated that only 10 of the 800 software companies in Vietnam
have ISO/IEC 27001:2005 certificates for information security. The certificates are important for IT firms,
business and institutions applying IT solutions. So far only banks, finance and data centres have focused on
information security certificates. According to Duong the primary barrier to achieving information security
certificates has been the fee required, as well as the requirement that all software must have licenses for a
firm to be eligible (with piracy prevalent). The government is offering a total disbursement of VND20bn for
firms obtaining ISO27001 certificates for information security.
Import Restrictions On Used PCs
In 2012, the Vietnamese government introduced a new regulation restricting the import of several categories
of used consumer electronics products, including tablets. Under the Circular No. 11/2012 of the MIC,
enterprises can import used products to serve their R&D purposes. However, tablets, (and smart phones)
have been added to the list of products subject to restrictions. Enterprises now have to get confirmation
from the MIC that the enterprises are importing products for R&D. The confirmation will then have to be
presented to the customs agencies to get the imports cleared. The regulations, which include a requirement
that imported used electronics products should not be more than one year old, will help to curb the growth
of one channel for gray market refurbished devices.
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Data Digitalisation Export VAT Threatens BPO Development
Local outsourcing firms have been petitioning the Ministry of Finance over the 10% VAT on digital
services that came into effect in March 2012, whereas prior to that firms benefited from no VAT. Firms
have petitioned the government claiming that the VAT makes Vietnamese firms less competitive
internationally and therefore affects the attractiveness of the country to international investors. The Ministry
of Finance responded, stating that export services will be subject either to zero VAT or a tax exemption.
Page 61
Competitive Landscape
International Companies
Table: Samsung Electronics
Address
Yen Phong 2 Industrial Zone, Long Chau Ward, Yen Phong District, Bac Ninh
Province, Vietnam
Company History
Samsung Electronics is part of South Korea-based industrial conglomerate the Samsung

Group and is one of the leading consumer electronics brands in the world. As well as
selling devices in Vietnam, Samsung also has a major production base in the country
spread across several facilities with total staff of 25,000. In 2009 it opened a US$700mn
production facility near Hanoi, with capacity of 100mn units per year and staff of 10,000.
The facility is largely for export, with estimated revenues of US$5bn a year (approximately
6% of Vietnam's total export revenues). In 2012 Samsung began plans for a significant
expansion of production in Vietnam as it shifts away from China to avoid rising labour
costs, with wages in Vietnam as little as a third of those in China. Samsung will also
benefit from no tax for the first four years of operation, and half the full rate for the
following 12 years. The new US$2bn facility will produce 40% of Samsung Electronics
global smartphones by 2015, about 120mn handsets, when full capacity is reached.
Services And Products
As well as being an important production base Vietnam is also a market in which

Samsung Electronics has seen great success. Samsung operates in the PC market, with
its share of the tablet market only exceeded by Apple. However, despite the favourable
reviews for its notebook products it remains a smaller player trailing the global leaders. It
has been the major beneficiary in the Google Android ecosystem of the smartphone and
tablet boom in recent years, but it has also seen success in the low and middle income
segment with a huge featurephone range. However, in 2013 Samsung's range of tablets
and smartphones have faced increasing competitive pressure from low priced rivals from
China that is putting pressure on units and margins.
Company Developments
In September 2013 Samsung announced its KNOX security platform was available for
consumers (although not for all smartphone models). The KNOX platform is a
hardware-software solution that allows selected applications to run within a container
away from the rest of the device data.
Samsung launched its latest flagship smartphone, the Galaxy S4, in Vietnam in April
2013 through all major retail chains and mobile operators.
In September 2013 Samsung Electronics announced plans to build a US$1.2bn chip
and components plant in the northern province of Thai Nguyen to supply its tablet and
smartphone production facilities. The plant will be operational by August 2014.
Source: BMI
Page 62
Table: Intel
Address
Office Hanoi Tung Shing Square 2 Ngo Quyen St., Suite 1106 Hoan Kiem District,
Hanoi Vietnam
Company History
Intel opened its first office in Vietnam in 1997 and continues to be responsible for
developing and deploying strategies to support OEMs and developers in the local
market. In 2006 Intel announced it was going to invest US$1bn in an assembly test
facility in Vietnam near Ho Chi Minh City, which began operation in 2010. The plant in
Vietnam is one of seven Intel production facilities globally, as it chose Vietnam due to
technical proficiency, low cost of labour and proximity to large and important markets.
Intel was the first major foreign investor in Vietnam's technology sector, and the first
investment in the semiconductor industry. Intel also works with Vietnam's Ministry of
Education and Training and Vietnamese universities to improve educational programs,
as well as providing scholarships to students.
Intel provides support to local partners through its head office in Ho Chi Minh city but its
more significant presence in the country is through its production facility. The facility in
Vietnam is the largest assembly test facility in Intel's global network to produce chipsets.
In July 2010 the facility began using the latest chipsets for mobile computing products
such as laptops, tablets and smartphones. It uses the flip chip ball grid array binding
technology for mobile processors. Intel states that its 500,000 square foot facility in
Vietnam is now the model for new larger efficient assembly facilities it will build around
the world.
In December 2013 the transfer of capital from Intel Asia Holding to another Intel
company for a cost of US$100mn was cited as an example of tax loopholes utilised by
foreign companies. The Ho Chi Minh City People's Committee asked the Ministry of
Finance to implement new mechanisms and policies to manage such share
purchasing and franchising more effectively.
A prime ministerial decision in November 2013 stated that producers of electronics
products will be responsible for treating or recycling electronic waste from January 1
2015. Intel is ahead of many of its partners, with its e-waste already treated by locally
owned Ngoc Tan Kien Company.
Source: BMI
Page 63
Table: LG Electronics
Address
14th Floor, Hanoi Central Office Blog. 44B Ly Thuong Kiet, Hanoi
Company History
LG Electronics Vietnam was founded in 2007 and the market is a key sales and
production centre for the South Korean group. In 2013 it was reported that LG was
building a new production facility in Vietnam, which will absorb its two existing
facilities in Vietnam, which are capable of producing 750,000 TV sets, 400,000 mobile
handsets, 150,000 air conditioners, 500,000 washing machines and 500,000 vacuum
cleaners annually. LG stated that the new facility in Haiphong City will for the majority
produce products for the local market, however there will also be some exports as LG
takes advantage of the low-cost of skilled labour in Vietnam.
LG is a leading vendor in the smartphone market, with over 12mn shipments globally
in Q313, making it the fourth largest vendor. It also produces featurephones and
handsets, with total Q313 shipments of around 18mn globally. It is through
featurephones and traditional handsets that LG has captured share in the price
sensitive consumer electronics market in Vietnam. LG is also competing in the tablet
market with devices running Google's Android OS, although its share is far below that
achieved in the smartphone market. Meanwhile, LG is estimated to be the second
largest TV vendor globally, with a share of around 15%, behind only Samsung. It also
produces a range of home appliances (refirgerators, dishwashers, washing machines
and microwaves) and solar panels. LG Electronics also has a large production base in
Vietnam and will produce TV sets, telematics devices, smartphones, tablets, washing
machines and refrigerators at its new facility.
In September 2013 LG Electronics announced it would invest US$1.5bn to expand its

production facilities in Vietnam. The production capacity will be located in Haiphong
City, 100km east of Hanoi, and be built over the course of 10 years. The investment
will also see the relocation of LG's two existing plants in Vietnam. Investment will take
place in two phases, with the first reaching US$500mn from 2013-2017, and the
second from 2018-2024 comprising US$1bn. The Vietnamese government has
provided tax incentives for the investment.
Source: BMI.
Page 64
Table: Global CyberSoft
Address
Helios Bldg, Quang Trung Software City, Tan Chanh Hiep Ward,District 12, Ho
Chi Minh City, Vietnam
Company History
Global CyberSoft was founded in California in July 2000 and has grown
internationally, particularly into South East Asia. Global CyberSoft moved its Global
Development Centre to Quang Trung Software City in Vietnam in 2007. In order to
meet growing international demand Global CyberSoft is opening a second
development centre in Da Nang. Vietnam has become one of its largest offices
globally, with a strong focus on software development. It employs a total of over 550
staff, with almost 500 engineers on staff in the country.
Global CyberSoft is a software development outsourcing company, with its global

development centre located in Vietnam. The development centre in Vietnam serves
clients domestically, but the majority of its business comes from abroad, with the US
and Japan key markets. As well as software development Global CyberSoft offers
other outsourcing services including R&D outsourcing, system integration, ERP and
business analytics, application testing and automatic testing. It gets the largest share
of its business from the healthcare and telecoms sectors but in 2013 Global
CyberSoft reported that it has experienced growing demand from the insurance
sector.
In March 2013, Global Cyber Soft announced a new outsourcing contract from a
satellite telecom network in the US. GCS has been expanding into new markets
following initial success with Japanese firms, particularly in automation projects,
which it expects to continue in 2013.
In October 2013, GCS announced the completion of an SAP BusinessObjects
implementation project for MegaStar Media Company. BusinessObjects is SAP's
business intelligence solution.
Source: BMI
Page 65
Local Companies
Table: Sara Vietnam
Address
182 Le Dai Hanh st., Ward 15, Dist. 11, Ho Chi Minh City, Vietnam
Company History
Sara Vietnam was founded in 2002 as a information technology and foreign language
skills training centre through the SARA Centre. It has since expanded into new fields, but
remains headquartered in Hanoi. Sara Vietnam is a member of the Vietnam Software
Association and the Vietnam Chamber of Commerce and Industry. Sara Vietnam is also
listed at the Hanoi Securities Trading Centre. Sara Vietnam was the first recipient of
Japanese investment in Vietnam, with 15% of its shares owned by Japanese CPR
International.
Sara Vietnam began as a training company but has expanded into a variety of
information technology fields. It offers IT research and software development services,
particularly software development for datacentres, e-commerce, e-portals, content
management, online training software, accounting, procurement, human resources,
customer service, industrial production technology and hospital management. Sara also
provides consultancy services for software systems. It also has activities in non-IT
related areas including television programming and real estate development and
management, and is evaluating a move into the mobile marketing industry in Vietnam.
In October 2013 Sara Vietnam announced it was implementing the Japanese model
5s of managing operations to increase efficiency. Sara stated that it does not expect
significant expenditure in implementing the new work practices, but will generate
efficiencies.
Source: BMI
Page 66
Company Profile
FPT Software
SWOT Analysis
Strengths
Based in fast-growing market for IT services provision.
International outlook including Japanese market that provides around half of the
company's revenues.
Weaknesses
Strong position on developed markets in Europe and US that have lower growth
prospects.
Opportunities
Lacks scale compared to Chinese counterparts.
Well positioned to capitalise on growth of outsourcing from Japanese enterprises

through F-Agrex joint venture.
Growing regional market presents expansion opportunities.
Developing market for financial services in the region puts FPT in strong position to
capitalise following inclusion into Eon Technologies BankFlex programme.
International expansion into Japan and US markets has yielded revenue growth and
new markets.
Threats
Established players in India offer considerable competition for overseas clients.
Yen depreciation has made FPT products less cost competitive in a key market in its
expansion plan.
Company Overview
FPT Software was founded in 1999 and has become Vietnam's largest software
outsourcing company. It has headquarters in Hanoi and had an engineering workforce
of 5,000 as of December 2013. FPT offers software custom development and
outsourcing services to foreign companies. Specific services include software
development and maintenance, ERP implementation, migration, embedded systems
and quality testing. FPT's expertise covers verticals such as automotive, healthcare,
Page 67
distribution and supply chain, mobile, ISV, banking and finance, manufacturing,
telecommunications and education. FPT Software has 250 customers worldwide,
including nearly 40 customers in the Fortune 500, which operate in the fields of
manufacturing, semiconductor, pharmaceuticals, oil and gas, financial services and
satellite TV.
Strategy
FTP is looking to stake a position in cloud computing and big data markets. In May
2011 it announced a cloud-computing alliance with Microsoft. The company has said
that it will continue to focus on an 'e-Citizens' strategy of concentrating on core
business areas and trying to increase synergies among product and service
introductions by FPT group companies.
In early 2014 Bui Quang Ngoc, FPT Group General Director, stated FPT was setting
aside US$50mn for acquiring technology enterprises in 2014. FPT is targeting
companies with around 50 or more staff that can provide new technologies, services
and markets. It is expecting to make foreign acquisitions that extend its reach.
FPT is also expanding organically, and it is expected to recruit 2,500 staff in 2014 - and
is aiming for revenue growth of over 30%. Its longer term goal is to reach revenue of US
$200mn and 10,000 employees in 2016.
Developments
Japan was a key market in 2013 for FPT, up 40%, and FPT is aiming for revenue of US
$200mn in 2017. Another international expansion effort is targeting the US where
revenue was up 70% in 2013, and it is aiming for US$200mn revenue in 2016.
In August 2013 FPT announced it won its biggest ever cloud computing contract in the
US, worth over US$1mn. FPT Software is based on the SaaS model, with FPT
participating in all phases of the project from consulting, design to deployment.
In July 2013 FPT signed a contract to upgrade the Oracle ERP system, deploying
additional Oracle Business Intelligence Applications, for Vietnam Dairy Products
(Vinamilk). The project is reported to be worth VND15bn and includes software licences,
hardware infrastructure, consultation and implementation services.
In April 2013 Eon Technologies announced that FPT Software would e included in its
BankFlex integration program. Eon's BankFlex platform is a multi-channel banking suite
enabling new services such as internet banking, mobile banking, mobile wallet, SMS
banking, telephone banking, ATM and Teller support and back-end monitoring. The
platform is being rolled out to Vietnam and neighbouring markets as the banking sector
develops.
In March 2013 FPT formed a joint venture (JV) for business process outsourcing (BPO)
with Japan's Agrex, which has been touted as the first BPO JV in ASEAN. Both
companies invested in the creation of F-Agrex, which will begin operations in July 2013.
F-Agrex will initially target the Japanese outsourcing market, before expanding globally.
Staff at launch will number 100 but the JV is targeting growth to 500 staff by 2015.
Page 68
In 2012 FPT established an office in Germany to target the European market. It also
launched its first application development on Amazon Web Services on a project with a
Japanese electronics company.
In 2011 FPT unveiled a major new restructuring plan, which will consolidate five
technology subsidiaries in a search for higher growth. The company's five subsidiaries FPT Information System, FPT Telecom Corp, FPT Software, FPT Online and FPT
Trading Group - will be merged, with the company either buying out minority
shareholders or facilitating a share swap.
Among major developments in 2010, FPT revealed that it had launched a US$2mn
outsourcing contract to develop core retail and e-commerce software for Nissen Co.
The company's US$12mn revenues in Q110 exceeded planned projections by 9%,
while profits were 46% higher than initially projected. The fastest growth compared with
2009 came in Vietnam, where revenues were up 90% y-o-y, while Asia Pacific
(excluding Japan) grew 47%; Europe, 75%; and the US, 69%. However, the Japanese
market, which accounts for over half of FPT's revenues, grew by only 16%.
Performance
FPT's profits before tax rose 5% year-on-year (y-o-y) to VND2.52trn (US$118.06mn) in
FY13. The company's profit after tax was VND2.07trn (US$96.98mn) and FPT's
revenues rose 13% to VND28.65trn (US$1.34bn). Its technology related business
reported a 10% rise in revenue to VND6.54trn (US$306.4mn), while its telecoms
businesses saw an 11% y-o-y jump in revenues to VND4.14trn (US$193.96mn) and its
distribution and retail businesses reported revenues of VND17.42trn (US$816.13mn), up
22%.Presence
FPT is headquartered in Hanoi, and has offices in Ho Chi Minh City and Da Nang in
Vietnam. The company is also present in some major global IT markets, including Japan
(Tokyo, Osaka), Australia, Singapore, Malaysia, the US, France and Germany. In March
2013 FPT opened its first R&D centre in the US in Silicon Valley. The centre will focus
on development and innovation in mobility, cloud and big data.
Sectors
FPT earns 56% of its revenues from Japan. The company focuses mainly on the largest
IT-spending verticals including banking and finance, telecoms, manufacturing,
government, retail, infrastructure and utilities. Major clients include Deutsche Bank,
Schroders, SoftBank, Omron, Hitachi and Unisys.
Table: FPT Group Revenue By Segment (VNDbn)
Telecommunication
Q112
Q212
Q312
Q412
Q113
Q213
Q313
Q413
658
675
708
710
768
819
822
845
Page 69
FPT Group Revenue By Segment (VNDbn) - Continued
Q112
Q212
Q312
Q412
Q113
Q213
Q313
Q413
Digital Content
380
520
424
488
207
223
227
225
Software Development
381
532
578
848
568
639
649
964
System Integration
488
524
454
1,453
327
898
605
1,129
Informatics services
120
191
166
204
151
171
178
258
Education
148
114
183
63
165
93
135
164
3,460
3,270
3,638
3,969
3,496
3,957
4,931
5,033
manufacture, distribution and retail
Source: FPT, BMI
Table: Profit Before Tax Margin By Segment (%)
Q311
Q411
Q112
Q212
Q312
Q412
Q113
Q213
Telecommunication
28.3
26.1
24.0
22.5
26.7
28.2
27.2
20.2
Digital Content
15.8
11.2
13.4
5.7
15.4
22.8
20.0
5.1
Software Development
15.0
20.6
21.9
23.8
21.0
23.8
15.8
18.1
System Integration
11.6
8.1
9.1
12.5
2.4
11.7
6.4
10.0
Informatics services
13.0
21.2
17.9
6.1
15.8
23.0
13.9
6.2
Education
35.5
27.1
29.1
15.0
29.1
20.2
25.3
19.5
4.0
4.0
1.7
1.7
3.3
2.4
2.1
1.9
manufacture, distribution and retail
Source: FPT, BMI

Financial Data
Annual Revenue (2010): VND20.5bn

EBITDA (2008): VND1.6bn
Net Profit (2008): VND1.1bn
Page 70
Company Details
FPT Software
FPT Building
Duy Tan Street
Cau Giay District
Hanoi
Vietnam
Tel: +84/(4) 3 768 9048
Fax: (4) 3 768 9049
fsoft.contact@fsoft.com.vn
www.fpt-software.com
Page 71
Regional Overview
Asia Pacific IT markets are on the whole developing rapidly, boosted by strong underlying economic
growth and proactive government policy. However the region is diverse in terms of geography, levels of
development and population, which is reflected in the makeup of IT markets and their medium term
prospects.
Cyber Security Could Derail Bright Outlook For Regional Leaders
In terms of the contribution to GDP there is great diversity across APAC. The higher income markets
generally have IT account for a greater share of GDP, as is the case at the global level. However a few
lower income markets have carved a position out for themselves in global supply chains boosting the share
of IT in GDP, for instance Thailand for production of semiconductors and the Philippines in outsourcing.
Singapore is expected to have the largest IT sector relative to the size of its economy at 2.3% in 2014,
slightly ahead of Hong Kong and Thailand at 2.1%. Singapore and Hong Kong share many similar
characteristics, with both high-income city-states benefiting from domestic spending, as well as positioning
themselves as regional hubs for IT services vendors in the wider APAC region.
Hong Kong and Singapore are competing to become the leading regional cloud computing hub, with
significant inward investment taking place from cloud vendors and telecoms providers such as NTT. The
latest research from Rackspace shows that Hong Kong had the highest adoption rate for cloud services by
mid-2013, boosted by demand from the financial services sector. However, it should be noted that Hong
Kong and Singapore both trail leading global cloud markets in terms of the deployment of more complex
cloud solutions such as hybrid clouds, disaster recovery, and testing and development.
Singapore's government has put in place policies to close the gap with Hong Kong and global leaders by
boosting local expertise in the emerging technology of Big Data applications. In August 2013 it was
announced that the Infocomm Development Authority of Singapore (IDA) had partnered with Revolution
Analytics, a commercial provider of software, services and support for the open source "R" project, to form
a Business Analytics Centre of Excellence. The IDA's efforts will help Singaporean enterprises utilise Big
Data, and tap into local demand. The outlook for Big Data is positive with 80% of enterprises surveyed by
EMC stating that use of Big Data will lead to better decision making in their organisation. The survey,
released in September 2013, questioned 130 respondents, of which 63% believed that Big Data will be a key
factor determining winners and losers, while 37% stated they had already benefited from competitive
Page 72
advantage via the use of Big Data. The areas respondents believed Big Data will prove most beneficial were
data centre automation (83%) and cyber security (64%).
Other markets in APAC have also been able to carve out a position in global IT markets, for instance,
Philippines and Vietnam are both growing centres for outsourcing. The Philippines has a more developed
outsourcing industry and is now moving up the value chain to software and application development
services, but Vietnam is developing rapidly and is well positioned to benefit from demand from Japanese
enterprises. In January 2013 the Information Technology Promotion Agency survey of 1,100 Japanese IT
firms showed Vietnam was the first choice outsourcing destination, with 31.5% of firms choosing it, ahead
of India (20.6%), China (16.7%), Thailand (9.7%) and Philippines (7.4%).
The Vietnamese government is developing policy to maximise the development of the outsourcing industry.
In August 2013 a draft resolution from the Ministry of Information and Communications proposed
allocating at least 2% of the state budget for boosting the IT sector each year. The fund will be used to help
Vietnam catch up with regional rivals and move up the value chain in areas such as outsourcing and
software development. Such a financial commitment from the government, combined with Vietnam's
attractive cost profile, should see the IT market, and specifically outsourcing, continue on the recent
trajectory of rapid development.
The markets highlighted above are some of the regional outperformers, and cases where the industry is
developing rapidly. However, there is a trend that BMI highlights as a major downside risk across the
region - cyber security. Markets in Asia have among the highest incidences of cyber crime globally, and an
additional factor is politically driven cyber attacks from North Korea. Many governments in the region
updated cyber security policy and legislation in 2013, while also strengthening defensive capabilities,
however these steps could prove insufficient.
Even after state investment and policy reform we believe the potential for cyber security issues to slow IT
market development exists, as the loss of confidence from a severely disruptive attack would be significant
and long-lasting. It will be important over the medium term that governments pursue proactive rather than
reactive cyber security policy to remain ahead of threats in terms of defensives and retaliatory capabilities.
South Korea is the most exposed to this risk due to the activities of North Korea, as demonstrated by the
number of attacks in 2013, and recent experience shows how state spending has had to be increased. In
March 2013 South Korean banks -including Shinhan, Nonghyup and Jeju - and TV broadcasters were
subject to an attack from North Korea which disrupted their operations. The attacks followed a February
2013 statement from North Korean leader Kim Jong-un, expressing confidence in the government's cyber
Page 73
warfare capabilities against South Korea. The government had set aside KRW240bn for information
protection and less than KRW10bn for strengthening cyber warfare capabilities, but these plans came under
pressure following another round of attacks. In late June and early July 2013 there were attacks during
which 69 government offices, news outlets and other institutions, including the presidential office website
were attacked. It was reported that 2.5 million members of the ruling Saenuri Party, 300,000 military
personnel and 200,000 registered users of the presidential office's website had data stolen. The South
Korean experience illustrates the scale of the potential threat, and the scope for spending increases.
Hardware Sales Opportunity Remains

The most advanced markets in APAC are geared
towards IT software and services, deploying
IT Market As % Of GDP
emerging technologies and combating the associated
2014
risks of cyber security. However, in the two largest

markets in the region - China and India - spending is
still weighted towards hardware, and with low PC
penetration a significant growth opportunity remains
for vendors.
Household PC penetration in Australia, Singapore,

South Korea and Hong Kong at the end of 2011 was
already high at around 80%. These mature markets
are high income, and as such the upgrade/
replacement markets are still lucrative for vendors.
However it is in the middle income markets that
Source: BMI
greater potential exists. China and India, with their

huge populations and respective PC penetrations of 38% and 6.9% at the end of 2011 grab the attention, but
Indonesia, Philippines, Vietnam and Sri Lanka are also notable opportunities. As incomes increase in these
markets BMI expects the same pattern of rising PC penetration to occur.
Increases in PC penetration will not be uniform as rising incomes are not the only driver of spending on
PCs, with factors such as government policy ie PCs for students programmes and financial assistance for
low-income families, also determinants. However, there is a strong relationship between higher incomes
and PC penetration. We forecast strong growth in GDP per capita for all the catch-up markets to 2017, but
the outlook for Vietnam, Sri Lanka and China are particularly strong. Vietnam and China are also markets
Page 74
where the government is promoting PC ownership, so we expect them to outperform. Despite the Akash2
initiative we expect India will continue to lag behind its regional peers over the medium term.
The medium-term opportunities for hardware vendors in the large catch-up markets of APAC is in stark
contrast to the recent experience in their core markets in North America and Europe where maturity,
economic weakness and tablet cannibalisation have resulted in market declines. Consumers in APAC may
also opt for tablets instead of traditional notebooks and desktops, but we believe the threat is less
pronounced in the first time buyer market where productivity features will be important. So far tablet sales
have predominantly been to existing PC owners, whereas to tap the emerging market opportunity in the
first-time buyer market, BMI believes a mix of mobility and productivity could underpin outperformance,
for instance via hybrids/convertibles or tablets with greater functionality.
Rising Incomes Deepen The Market

Household PC Penetration Vs GDP
Source: BMI, national regulators, WEF
Page 75
Demographic Forecast
Demographic analysis is a key pillar of BMI's macroeconomic and industry forecasting model. Not only is
the total population of a country a key variable in consumer demand, but an understanding of the
demographic profile is key to understanding issues ranging from future population trends to productivity
growth and government spending requirements.
The accompanying charts detail Vietnam's population pyramid for 2013, the change in the structure of the
population between 2013 and 2050 and the total population between 1990 and 2050, as well as life
expectancy. The tables show key datapoints from all of these charts, in addition to important metrics
including the dependency ratio and the urban/rural split.
Population Pyramid
2013 (LHS) And 2013 Versus 2050 (RHS)
Source: World Bank, UN, BMI
Page 76
Population Indicators
Population (mn, LHS) And Life Expectancy (years, RHS), 1990-2050
Source: World Bank, UN, BMI
Table: Vietnam's Population By Age Group, 1990-2020 ('000)
1990
1995
2000
2005
2010
2013e
2015f
2020f
68,910
76,020
80,888
84,948
89,047
91,680
93,387
97,057
0-4 years
9,315
9,323
7,128
6,898
7,229
7,152
7,012
6,575
5-9 years
8,606
9,212
9,253
7,023
6,791
7,052
7,181
6,968
10-14 years
7,857
8,541
9,162
9,117
6,899
6,619
6,757
7,147
15-19 years
7,359
7,788
8,492
9,050
9,011
7,686
6,866
6,726
20-24 years
6,644
7,222
7,673
8,333
8,874
9,148
8,936
6,802
25-29 years
6,006
6,470
7,065
7,471
8,112
8,528
8,772
8,837
30-34 years
5,138
5,890
6,352
6,910
7,286
7,703
8,022
8,680
35-39 years
3,888
5,065
5,803
6,242
6,763
7,011
7,208
7,940
40-44 years
2,463
3,826
4,994
5,719
6,147
6,472
6,685
7,127
45-49 years
2,017
2,409
3,753
4,935
5,648
5,894
6,054
6,589
50-54 years
1,968
1,959
2,346
3,700
4,855
5,306
5,521
5,926
55-59 years
2,046
1,891
1,885
2,237
3,542
4,278
4,677
5,330
60-64 years
1,669
1,934
1,790
1,734
2,068
2,795
3,352
4,444
65-69 years
1,412
1,522
1,771
1,610
1,562
1,673
1,906
3,104
70-74 years
1,028
1,216
1,322
1,530
1,399
1,360
1,379
1,695
Total
Page 77
Vietnam's Population By Age Group, 1990-2020 ('000) - Continued
1990
1995
2000
2005
2010
2013e
2015f
2020f
75-79 years
752
819
984
1,080
1,263
1,219
1,167
1,160
80-84 years
430
536
597
732
815
919
964
900
85-89 years
224
261
336
385
483
517
546
654
90-94 years
71
108
132
177
210
245
268
306
95-99 years
16
25
41
53
74
83
89
115
100+ years
12
17
21
24
30
e/f = BMI estimate/forecast. Source: World Bank, UN, BMI
Table: Vietnam's Population By Age Group, 1990-2020 (% of total)
1990
1995
2000
2005
2010
2013e
2015f
2020f
0-4 years
13.52
12.26
8.81
8.12
8.12
7.80
7.51
6.77
5-9 years
12.49
12.12
11.44
8.27
7.63
7.69
7.69
7.18
10-14 years
11.40
11.23
11.33
10.73
7.75
7.22
7.24
7.36
15-19 years
10.68
10.25
10.50
10.65
10.12
8.38
7.35
6.93
20-24 years
9.64
9.50
9.49
9.81
9.97
9.98
9.57
7.01
25-29 years
8.72
8.51
8.73
8.79
9.11
9.30
9.39
9.11
30-34 years
7.46
7.75
7.85
8.13
8.18
8.40
8.59
8.94
35-39 years
5.64
6.66
7.17
7.35
7.60
7.65
7.72
8.18
40-44 years
3.57
5.03
6.17
6.73
6.90
7.06
7.16
7.34
45-49 years
2.93
3.17
4.64
5.81
6.34
6.43
6.48
6.79
50-54 years
2.86
2.58
2.90
4.36
5.45
5.79
5.91
6.11
55-59 years
2.97
2.49
2.33
2.63
3.98
4.67
5.01
5.49
60-64 years
2.42
2.54
2.21
2.04
2.32
3.05
3.59
4.58
65-69 years
2.05
2.00
2.19
1.89
1.75
1.83
2.04
3.20
70-74 years
1.49
1.60
1.63
1.80
1.57
1.48
1.48
1.75
75-79 years
1.09
1.08
1.22
1.27
1.42
1.33
1.25
1.19
80-84 years
0.62
0.70
0.74
0.86
0.91
1.00
1.03
0.93
85-89 years
0.32
0.34
0.42
0.45
0.54
0.56
0.58
0.67
90-94 years
0.10
0.14
0.16
0.21
0.24
0.27
0.29
0.32
95-99 years
0.02
0.03
0.05
0.06
0.08
0.09
0.10
0.12
Page 78
Vietnam's Population By Age Group, 1990-2020 (% of total) - Continued
100+ years
1990
1995
2000
2005
2010
2013e
2015f
2020f
0.00
0.00
0.01
0.01
0.02
0.02
0.03
0.03
Table: Vietnam's Key Population Ratios, 1990-2020
Dependent ratio, % of total working age

Dependent population, total, '000
1990
1995
2000
2005
2010 2013e
75.8
71.0
61.3
50.8
42.9
41.4
2015f
2020f
41.3
41.9
29,712 31,567 30,734 28,617 26,741 26,860 27,293 28,655
Active population, % of total
56.9
Active population, total, '000
58.5
62.0
66.3
70.0
70.7
70.8
70.5
39,198 44,453 50,154 56,331 62,306 64,820 66,094 68,402
Youth population, % of total working age
65.8
Youth population, total, '000
60.9
50.9
40.9
33.6
32.1
31.7
30.2
25,778 27,076 25,544 23,038 20,918 20,822 20,950 20,690
Pensionable population, % of total working age

Pensionable population, total, '000
10.0
10.1
10.3
9.9
9.3
9.3
9.6
11.6
3,934
4,491
5,190
5,579
5,823
6,037
6,343
7,965
Table: Vietnam's Rural And Urban Population, 1990-2020
1990
1995
2000
2005
2010
2013e
2015f
2020f
Urban population, % of total
20.3
22.2
24.4
27.3
30.4
32.3
33.6
36.9
Rural population, % of total
79.7
77.8
75.6
72.7
69.6
67.7
66.4
63.1
Urban population, total, '000
13,958
16,867
19,716
23,175
27,064
29,632
31,384
35,771
Rural population, total, '000
54,952
59,153
61,172
61,773
61,983
62,048
62,003
61,286
Page 79
Methodology
Industry Forecast Methodology
BMI's industry forecasts are generated using the best-practice techniques of time-series modelling and
causal/econometric modelling. The precise form of model we use varies from industry to industry, in each
case being determined, as per standard practice, by the prevailing features of the industry data being
examined.
Common to our analysis of every industry is the use of vector autoregressions. They allow us to forecast a
variable using more than the variable's own history as explanatory information. For example, when
forecasting oil prices, we can include information about oil consumption, supply and capacity.
When forecasting for some of our industry sub-component variables, however, using a variable's own
history is often the most desirable method of analysis. Such single-variable analysis is called univariate
modelling. We use the most common and versatile form of univariate models: the autoregressive moving
average model (ARMA).
In some cases, ARMA techniques are inappropriate because there is insufficient historic data or data quality
is poor. In such cases we use either traditional decomposition methods or smoothing methods as a basis for
analysis and forecasting.
We mainly use OLS estimators and in order to avoid relying on subjective views and encourage the use of
objective views, BMI uses a 'general-to-specific' method. BMI mainly uses a linear model, but simple nonlinear models, such as the log-linear model, are used when necessary. During periods of 'industry shock', for
example poor weather conditions impeding agricultural output, dummy variables are used to determine the
level of impact.
Effective forecasting depends on appropriately selected regression models. BMI selects the best model
according to various different criteria and tests, including but not exclusive to:
R2 tests explanatory power; adjusted R2 takes degree of freedom into account;
Testing the directional movement and magnitude of coefficients;
Hypothesis testing to ensure coefficients are significant (normally t-test and/or P-value);
All results are assessed to alleviate issues related to auto-correlation and multi-collinearity;.
Page 80
BMI uses the selected best model to perform forecasting.
It must be remembered that human intervention plays a necessary and desirable role in all of BMI's industry
forecasting. Experience, expertise and knowledge of industry data and trends ensure analysts spot structural
breaks, anomalous data, turning points and seasonal features where a purely mechanical forecasting process
would not.
Sector-Specific Methodology
A number of criteria drive our forecasts for each IT variable.
IT forecasting is complicated due to the fragmented nature of the market, with little transparency of vendor
data and low apparent agreement between many sets of figures in terms of market definition, base and
methodology. In addition, forecasts are affected by consideration of a variety of internal and external
political and economic factors.
Within best-practice techniques of time-series modelling, our quarterly updated forecasts are improved
substantially by intimate knowledge of the prevailing features of each local market.
Individual variables taken into account in creating each forecast include:
Overall economic context, and GDP and demographic trends;
Underlying 'information society' trends;
Projected GDP share of industry;
Maturity of market structure;
Regulatory developments and government policies;
Developments in key client sectors such as telecommunications, banking and e-government;
Technological developments and diffusion rates;
Exogenous events.
Estimates are calculated using our own macroeconomic and demographic forecasts.
Sources
Additional sources used in IT reports include national ministries and ICT regulatory bodies, national
industry associations, and international industry organisations such as the International Telecommunication
Page 81
Union (ITU), officially released company results and figures, and international and national industry news
agencies.
Risk/Reward Ratings Methodology
BMI's Risk/Reward Ratings (RRR) provide a comparative regional ranking system evaluating the ease of
doing business and the industry-specific opportunities and limitations for potential investors in a given
market. The RRR system divides into two distinct areas:
Rewards: Evaluation of sector's size and growth potential in each state, and also broader industry/state
characteristics that may inhibit its development. This is further broken down into two sub categories:
Industry Rewards (an industry-specific category taking into account current industry size and growth
forecasts, the openness of market to new entrants and foreign investors, to provide an overall score for
potential returns for investors).
Country Rewards (a country-specific category, factoring in favourable political and economic conditions
for the industry).
Risks: Evaluation of industry-specific dangers and those emanating from the state's political/economic
profile that call into question the likelihood of anticipated returns being realised over the assessed time
period. This is broken down into two sub categories:
Industry Risks (an industry-specific category whose score covers potential operational risks to investors,
regulatory issues inhibiting the industry and the relative maturity of a market).
Country Risks (a country-specific category in which political and economic instability, unfavourable
legislation and a poor overall business environment are evaluated to provide an overall score).
We take a weighted average, combining industry and country risks, or industry and country rewards. These
two results in turn provide an overall Risk/Reward Rating, which is used to create our regional ranking
system for the risks and rewards of involvement in a specific industry in a particular country.
For each category and sub-category, each state is scored out of 100 (100 being the best), with the overall
Risk/Reward Rating a weighted average of the total score. As most of the countries and territories evaluated
are considered by BMI to be 'emerging markets', our rating is revised on a quarterly basis. This ensures the
rating draws on the latest information and data across our broad range of sources, and the expertise of our
analysts.
Page 82
Sector-Specific Methodology
In constructing these ratings, the following indicators have been used. Almost all indicators are objectively
based.
Table: It Risk/Reward Ratings Indicators
Indicator
Rationale
Rewards
Industry
IT market value, US$bn
Denotes breadth of IT market. Large markets score higher than smaller ones.
Sector value growth, %

year-on-year (y-o-y)
Denotes sector dynamism. Scores based on annual average growth over five-year forecast
period.
Government initiatives and

spending
Denotes spending boost provided by public sector, which can be a crucial determinant of
sector development.
Hardware, % of total sales
Denotes maturity of market. A high proportion of hardware sales, compared to services/

software, indicates that the overall IT market is immature.
Country
Urban-rural split
Urbanisation is used as a proxy for development. Mainly rural states score lower.
GDP per capita, US$
A high GDP per capita supports long-term industry prospects.
Overall score for Country Rewards is also affected by the coverage of the power transmission network across the state.
Risks
Industry
Intellectual property (IP)
laws
Markets with fair and enforced IP regulations score higher than those with endemic
counterfeiting.
ICT policy
Subjective evaluation of official policy towards IT development, as enshrined in statute and

tax code.
Country
Short-term external risk
Rating from BMI's Country Risk Ratings (CRR). It evaluates the vulnerability to external
shock, which is the principal cause of economic crises. Such a crisis would cut investment.
Short-term financial risk
Rating from CRR, to denote risk of currency crisis and stability of banking sector. The
former would hit revenues in hard currency, while the latter would curtail investment
funding.
Trade bureaucracy
Rating from CRR to denote ease of trading with the state.
Legal framework
Rating from CRR denotes the strength of legal institutions in each state - security of
investment can be a key risk in some emerging markets.
Bureaucracy
Rating from CRR denotes ease of conducting business in the state.
Corruption
Rating from CRR denotes the risk of additional illegal costs/possibility of opacity in
tendering/business operations affecting companies' ability to compete.
Source: BMI
Page 83
Weighting
Given the number of indicators/datasets used, it would be wholly inappropriate to give all sub-components
equal weight. The following weighting has been adopted:
Table: Weighting Of Components
Component
Rewards
Weighting, %
70, of which
- Industry
65
- Country
35
Risks to
30, of which
- Industry
40
- Country
60
Source: BMI
Page 84

BMI Vietnam Information Technology Report Q2 2014 PDF

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Q2 2014

Vietnam Information Technology

Part of BMIs Industry Report & Forecasts Series

Business Monitor International

2014 Business Monitor International

Vietnam Information Technology Report Q2 2014

Industry Forecast .............................................................................................................. 16

Macroeconomic Forecasts ............................................................................................... 23

Industry Risk Reward Ratings .......................................................................................... 27

Market Overview ............................................................................................................... 30

Industry Trends And Developments ................................................................................ 52

Regulatory News .................................................................................................................................... 59

Competitive Landscape .................................................................................................... 62

Local Companies ................................................................................................................................... 66

Company Profile ................................................................................................................ 67

Business Monitor International

Vietnam Information Technology Report Q2 2014

Regional Overview ............................................................................................................ 72

Demographic Forecast ..................................................................................................... 76

Business Monitor International

Vietnam Information Technology Report Q2 2014

BMI Industry View

Headline Expenditure Projections

Key Trends & Developments

Business Monitor International

Vietnam Information Technology Report Q2 2014

Business Monitor International

Vietnam Information Technology Report Q2 2014

Limited access to credit and budgets restrain spending by SMEs.

Highly cost-sensitive market, with 75% of software provided by lower-cost local

Vietnam is a popular destination for software development and IT services

Business Monitor International

Vietnam Information Technology Report Q2 2014

SWOT Analysis - Continued

SMEs have much potential to increase spending on basic solutions, including

Business Monitor International

Vietnam Information Technology Report Q2 2014

Vietnam's fixed-line and internet access markets are dominated by state-controlled

Although alternative broadband infrastructures are currently being explored,

Broadband tariffs remain high, creating a barrier for low-income subscribers to

Significant opportunities exist to develop alternative broadband technologies,

Business Monitor International

Vietnam Information Technology Report Q2 2014

Fixed-line sector may enter a period of decline, with potentially negative

VTV's dominance in the pay-TV sector is holding back market development.

Business Monitor International

Vietnam Information Technology Report Q2 2014

The Communist Party of Vietnam remains committed to market-oriented reforms and

Vietnam has allowed legislators to become more vocal in criticising government

Macroeconomic instabilities continue to weigh on public acceptance of the one-party

Business Monitor International

Vietnam Information Technology Report Q2 2014

The heavily-managed and weak currency reduces incentives to improve quality of

Urbanisation will continue to be a long-term growth driver. The UN forecasts the

Prolonged macroeconomic instability could prompt the authorities to put reforms on

Business Monitor International

Vietnam Information Technology Report Q2 2014

Vietnam remains one of the world's most corrupt countries. According to

Vietnam is increasingly attracting investment from key Asian economies, such as

Business Monitor International

Vietnam Information Technology Report Q2 2014

e/f = BMI estimate/forecast. Source: BMI.