- Vietnam’s information technology sector is experiencing high growth, driven by low costs and high-quality labor.
- Vietnam has now become the eighth largest provider of IT services globally.
- The IT industry is supported by the government with tax and labor incentives, further propelling its growth.
As Vietnam moves from low-tech manufacturing to a service-oriented economy, the country’s information technology (IT) market is increasingly gaining traction, giving competition to IT firms in China and India. This has partly been encouraged by the growth of Vietnam as a regional market for domestic enterprises and global technology vendors.
As Vietnam adopts Industry 4.0 across all industries, investors should consider the benefits of locating their IT business to the country.
Most of the industry is foreign-invested, with multinationals funding projects to build electronic components in the country. At least 86 percent of total IT revenues in 2017 were derived from hardware. Due to strong growth trajectories, strategic advisory firm and global outsourcing firm Tholons has rated Vietnam as the eighth leading provider of IT services globally.
A good example of this success can be found in Samsung’s recent decision to build eight factories and one R&D center – Intel Corporation also recently opened a chip assembly plant and testing facility in Ho Chi Minh City.
Five IT industries that are currently trending
To understand such strong growth, and what is contributing to it, we examine five sub-sectors that show potential and are currently trending in Vietnam’s IT sector.
Vietnam’s fintech industry is expected to reach US$7.8 billion in revenue by 2020. A rising middle class, growing internet usage, and a young population present a great combination for the fintech sector to thrive. An estimated 120 companies and brands cover a wide range of services, from digital payments to wealth management and blockchain.
Digital payments is the most popular segment, with mobile payment apps MoMo, Moca, and Zalo Pay leading the way. Peer-to-peer lending (P2P) is also becoming increasingly popular, with Tima, Growth Wealth, and Trust Circle among the most popular.
Blockchain and cryptocurrency is the third segment in this sector that is increasingly gaining traction. Several companies like TomoChain and Kyber Network deal in cryptocurrency, allowing consumers faster and cheaper transactions. In 2018, Vietnam held its first-ever international conference on blockchain and its potential for development in the country.
The artificial intelligence sector (AI) industry in Vietnam shows strong potential. While still developing, AI in the country has followed global trends in application to human resources, education, healthcare, agriculture, transport, and e-commerce.
A good example of how AI is being used domestically can be found in Vietnamese conglomerate FPT Corporation, which has used AI for smart traffic in Ho Chi Minh City. Viettel Group has used AI in endoscopy for their operations in Vietnam. Viettel is also using AI to fight cyberattacks and help businesses deal with internal IT security.
In August, the government issued Resolution No.50-NQ-TW, encouraging FDI by increasing the number of businesses to 50 percent by 2025 in advanced technology and Industry 4.0 – this could help develop AI further.
Vietnam’s e-commerce market could be ranked third after Indonesia and Thailand by 2025, according to the E-Business Index 2019 report by the Vietnam E-Commerce Association.
Vietnam’s e-commerce activity is most active in Hanoi and Ho Chi Minh City. Sales from these cities account for 70 percent of the country’s total. This represents a significant opportunity to penetrate rural markets – rural internet connectivity is strong, and a majority of the population lives there.
Domestic e-commerce firms such as Shopee, Sendo, and Tiki operate websites that compete with regional players like Lazada and Shopee. Consumers also use social media like Instagram and Facebook for e-commerce.
Over the last four years, Vietnam’s internet economy has attracted over US$1 billion in funding, but customer trust, high competition, and logistics costs remain challenges for e-commerce companies in the country.
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