BMI View: W e upgraded the growth outlook for Vietnam's consumer electronics devices market in the Q3 update after local retailers reported very strong sales of PCs, tablets, TVs, digital cameras and smartphones in H115 - particularly around the Tet New Year holiday season. Although we expect growth to slow in H215 , we consider Vietnam's consumer electronics market to have a bright outlook over the medium term as rising incomes and falling average device prices in key device categories catalyse strong growth in spending. W e maintain a positive outlook for the duration of our five - year forecast period, with CAGR of 7.7 % . Across the country, g rowth areas include smartphones, particularly low-cost devices from Chinese and local brands, and LED TV sets as Vietnam transitions from analogue to digital broadcasting . Vietnam is also rapidly becoming a key destination in global consumer electronics supply chains, with large investments announced by Samsung Electronics , Nokia and LG Electronics in 2013 and 2014 .
Headline Expenditure Projections
Computer Hardware Sales: USD1.41bn in 2014 to USD1.53bn in 2015, +8.6% in US dollar terms. Low-cost tablets from Chinese OEMs have proved popular with consumers, but there is also scope for growth in the desktop and notebook markets due to low household PC penetration.
AV Sales : USD1.01bn in 2014 to USD1.15bn in 2015, +13.8% in US dollar terms. Digitisation of TV services supporting AV spending growth by triggering upgrades, while owing to very low penetration the digital camera outlook is considerably brighter in Vietnam than in developed APAC markets.
Handset Sales : USD2.48bn in 2014 to USD2.86bn in 2015, +15.4% in US dollar terms. We expect another strong year of growth for smartphone sales in Vietnam in 2015, which will drive up the average selling price in the handset market.
Key Trends And Developments
Taking the consumer electronics market as a whole, a key pillar supporting BMI's view for growth outperformance is the underlying economic environment, with broad based growth expected to vastly deepen the market 2015-2019. In the Q3 2015 update we introduced an analysis of Vietnam's household income distribution - and the medium term growth trends. This clearly illustrates both the low income status of the Vietnamese economy in 2015 and the huge migration of households to higher income levels envisaged by our in-house Country Risk team 2015-2019. In 2015 BMI estimates 82.6% of Vietnamese households have incomes of USD5,000 or less - the level at which we consider them external to the consumer electronics market (2G handsets aside) due to a lack of purchasing power in global markets - one of the highest in the region. However, our forecast envisages far-reaching change over the medium term, with nearly 5.5mn households forecast to rise above USD5,000 annual income by 2019, reflecting the broad based nature of economic growth in Vietnam. This will be of huge benefit to PC, AV and smartphone vendors as households acquire their first devices or upgrade - and individuals begin to acquire personal devices. The outlook is one of the strongest globally for a deepening of the mass market, and is key to our view for Vietnam consumer electronics market outperformance over the medium term.
Vietnamese brand Bach Khoa Anti-virus Group (BKAV) launched its high-end BPhone smartphone at the Consumer Electronics Show in January 2015, ostensibly as a smart controller for a suite of smart home security applications. It has touted its credentials as a 'made in Vietnam' brand, and is initially launching the device in the local market. Although BKAV aims to sell the new device internationally, it will launch the device on the local market in April 2015, with the aim of displacing popular international brands such as BlackBerry, Samsung, LG and Apple. BKAV claims to have elicited interest from partners in the US and unspecified mature Asian markets. While it is not unusual for an unknown brand to quickly gain traction in well established markets (either through white-label relationships with operator partners or through the use of its own brand), the BPhone would need to stand out from the crowd in order for international distribution to be commercially viable for BKAV. The handset's design, which closely mimics that of the popular Apple iPhone and Samsung Galaxy devices, would certainly appeal to consumers in smartphone-centric markets, but BMI believes its lack of differentiation could undermine BKAV's laudable global growth aspirations.