Domestic electronics producers in desperate quandary

Experts have warned that high-tech electronic products, specifically complete built units (CBU) and low-price products, will flock into Viet Nam as of January 1, 2009 when Vietnam opens its market to electronics imports with 0% tax.

The latest sign that showed the ‘attack’ of CBU imports to the domestic market was Sony and Samsung’s launch of two of their high-grade products on November 5, 2008 into Vietnam’s market: the VAIO laptop and the smart LCD TV.

Importing CBU products preferable choice

Foreign electronics producers complain of difficulties in productions in Vietnam, due to weak supporting industries. If they have to import accessories to assemble domestically, they have to pay tax rates of 3-4% and 10-15%. In addition, foreign investors also have to pay other expenses to maintain production, such as the expenses of building factories and paying workers.

Therefore, it is clear that it would be more profitable to import products with a 5% tax to sell domestically, rather than setting up workshops to churn out products in Viet Nam.

Kimihiro Itoki, Director of Sony Electronics Vietnam, said that after the VAIO, Sony will bring more high-tech products that have never seen or have not been made in Viet Nam.

Samsung also said that it will keep making products that have a high demand on the domestic market. However, it will consider gradually cutting down the production, and plan to import high-tech products, like smart LCD TVs, big-screen LCD TVs and side-by-side refrigerators.

Vietnam’s market is also anticipated to be a place to consume low-price products. eTouch mobile phones, E-talk, Q-home gas stoves, Aquabeat Plus TVs, and Lafen have been available on the domestic market with very ‘soft’ prices, just several hundred thousand VND to VND 1-2 million for each product. These low-price products are not made domestically, but imported from China, Singapore, Malaysia and Indonesia

Local production becomes disadvantageous

Mr Itoki said that the appearance of VAIO in Vietnam could be seen as the first step of Sony Viet Nam in the process of shifting to imported CBU products for domestic sale

Analysts have warned that foreign producers prove to be superior to domestic producers in many areas, including the technology, price and the distribution networks, which will allow foreign producers to defeat domestic producers. Sony, for example, has 180 distributors nationwide, while Vietnamese producers do not have any. Samsung, LG and Panasonic also have wide distribution networks.

Meanwhile, experts cannot see any advantages of domestic producers. The production costs in Vietnam are not lower than in other regional countries, as local production is simply the assembling. Vietnamese companies do not have any special products which can compete with foreign ones.

Jumping into other fields

Nguyen Vinh, a loudspeaker producer in district 12, HCM City, said that he is going to stop production and shift to selling foreign-made products. He said that this kind of product can be imported with very low prices.

Local producers are thinking about how to survive the massive flow of foreign-products after January 1, 2009. They will have to either go into other fields of business, making products with which they do not have to confront foreign producers.

Tan Binh Electronics Company, for example, is planning to narrow the production of TV sets in order to shift to making electro-refrigeration products, computers and providing services.

Vu Hoang Chuong, Deputy General Director of JVC Viet Nam, said that it is the right choice for Vietnamese enterprises to change their fields of business.

Meanwhile, experts believe that Vietnamese enterprises should focus on making accessories and parts to provide to manufacturers as supporting industries are still weak in Viet Nam. If they try to maintain production, they will need to make special products to compete with the imports. (VNN)