Vietnam Electronics Enterprises Facing Challenges

According to Tran Quang Hung, General Secretary of Vietnam Electronic Enterprise Association, directly importing electronic goods will reduce the intermediary cost (through the consigners) of the FDI enterprises, which not only makes their import prices 5 to 10 percent lower than domestic goods, but also allows a wider variety of imported goods.

 

This once again threatens the 100 per cent capital owned enterprises in the country, because their electronic goods prices are now relatively higher. Nguyen Thinh, Director of Hanoi Electronic Development and Support Ltd, said that many enterprises have imported full parts of electronic goods when prices were reduced 5 percent in the past time, however, the total number of imports are not large enough to influence domestic goods. But there will be many changes once FDI enterprises are allowed to import full parts of electronics. Especially, goods imported from the original agents of the company with the warranty and attractive premiums will create severe competition on the electronic market in the next time. Therefore, the biggest problem for domestic enterprises now is how to prop up such “big bang” promotion of FDI enterprises.

 

Pham Thanh Tri, Director of Victory Company Computer (VVC), illustrated that in recent years, duties of the full-part electronic imports from AFTA have been lowered to 5 percent, forcing reduction in goods prices and leaving goods from other regions, imposed with 40 percent duties plus 10 percent VAT, unable to compete with ones installed in the country. Therefore, the promotion strategies of FDI enterprises impede the competitiveness of domestic enterprises with limited potential. In the end of 2006, FDI enterprises and distributors made an impression on consumers through promotions, but caused considerable pain to small enterprises, such as Viettronic Tan Binh, Bien Hoa, Thu Duc, etc. In the fourth quarter of 2006, this caused these enterprises difficulties in goods consumption, goods stagnancy in stock and employee layoffs. Moreover, in the first six months of 2007, domestic electronic enterprises, especially ones with weak budgets, met many impediments, namely slow consumption or capital shortage for promotion and sales. Many enterprises had to diversify business to the other services, such as, real estate, finance, even mobile sim. Another deputy director of a Vietnam electronic enterprise said that in the coming time, domestic electronic enterprises are at risk of having to narrow their operations or change business direction because cheaper imports will gain the advantage with customers, but cause small enterprises to narrow production accordingly.

 

It is forecast that in the end of 2007, there will be strong promotion of electronic products by FDI enterprises, not only increasing their sales but also polishing their brands, while pushing Vietnam electronic enterprises further into the trouble.