Friday Notes: Apple in Vietnam

In this episode (FN.004): What is Apple doing in Vietnam? How does Apple compete with Google and Samsung in the market?

Apple owns up to 6% of the smartphones market in Vietnam

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Below is a transcript of the episode, edited for readability.

Listen to the full episode at links below.

Granger: Good morning! Another Friday here in Saigon, Ho Chi Minh City. This is Granger Whitelaw and I will be joined by Cameron Lynch, who is moving a little slow this morning. It’s Friday morning. That means Cameron was out last night, again.

Cameron: That is not true. I was actually inside. A couple episodes back, I did say I was the troglodyte of Ho Chi Minh City, And I can assure you that I was playing World of Warcraft…

Granger: Speaking of gaming and technology, today we’re going to talk about Apple in Vietnam. And I want to talk a little bit about Google also because there seemed to be rumblings out there about Google in Vietnam. So, let’s go!

THE HISTORY OF APPLE AND VIETNAM

Granger: I’ve noticed that Apple Pay is not available in Vietnam right now. That’s something that I do want to chat about. Will it become available in Vietnam and why is it not here? But, let’s talk about the history of Apple and Vietnam first, and give everybody a little background.

Granger: In 2015, Apple invested about $675 million to set up a company, Apple Vietnam LLC. In 2016, they were planning on building a $1 billion database center in Vietnam, but I don’t believe that’s happened yet.

Cameron: I’m not too sure, but there’s a requirement that they just implemented in 2019 that all foreign companies have to have physical database in Vietnam.

Granger: Which is problematic in some ways because of the data issues and privacy issues here in Vietnam, which we will get much more involved with over the next couple months. And the iPhone sales are quite impressive. They own about 5 or 6% of the market right now in Vietnam. People love the iPhone. I have an iPhone.

Cameron: I’m amazed. They’re really everywhere. Even though android smartphones are the most used in the world, they have the highest market share, but I always see Apple smartphones. I don’t know if there’s something where the sales aren’t reported or maybe they’re knockoffs from China… Maybe they have an Apple smartphone cover and then have android running a fake Apple environment on it, which is really cool. 

Granger: Do you think people do that?

Cameron: I don’t know. But they do sell those smartphones as real Apple, but it’s half or third of the cost.

Granger: Well, that’s funny. Anyway, there are lots of iPhones. I happen to love my iPhone and my iPad. Certainly, Apple is an important factor in industry.

IS APPLE MOVING ITS PRODUCTION TO VIETNAM?

Granger: Apple is considering moving about 15 to 30% of their production capacity from China to Southeast Asia, and Vietnam is the most likely destination for that. Key iPhone assemblers like Foxconn, Pegatron, Wistron, and MacBook makers like Quanta Computer, iPad maker like Compal Electronics, and AirPods makers like Inventec, Luxshare-ICT and Goertek have all been asked to evaluate coming to Vietnam or moving outside of China. So this goes together with the trade war and everything that is going on. You see the impact is happening on a massive company.

Cameron: Another interesting point for the Apple AirPods, they also hedge their bets. They went “Okay, we’re not going to just go all the way into Vietnam. We’re also going to do India a little bit.” Then, they’re going to split production for the long term, in case there could be similar tensions in other parts of the world. 

Granger: There’s always an issue, right? I mean China did a great job 20 years ago in starting to train people, and now they have some of the most highly trained technology employees in the world, especially in chip manufacturing. That really gives them a true advantage. But the trade war really impacts that.

Cameron: And it’s also the costs. With those skills come some hard costs that are associated with rising salaries and et cetera…

Granger: Can Vietnam even sustain and absorb all of this? I mean it is overcapacity everywhere right now. The warehouses are full, the manufacturing facilities are full. People are trying to find new places that are way outside of the city. I was meeting with a friend of mine who runs one of the biggest shoe manufacturing companies in the world. And he was telling me that they were building way out in remote areas now, and they had to figure out about getting a company car, subsidizing motorcycles, giving two days off a week, doing more shifts because they can’t run five days a week employees because they want to live in the city. They don’t want to live three hours out. The capacity is really slim right now for people being able to come here. Not to mention the labor. 

Cameron: Well, there’s industrial parks that are becoming little cities themselves. They’re still looking for room. I don’t know how many industrial parks are actually in construction in Vietnam. But they’re becoming these own little mega cities in their own little areas. And it’s just amazing.

Granger: Samsung is here, in District 9. It has a huge facility, and they’re just growing. But those parks are now at capacity, which is why Foxconn has acquired the right to use a property in an industrial park in Northern Vietnam. They spent just under $17 million to do that.

Can Apple compete with other smartphone brands in Vietnam?

HOW ABOUT GOOGLE & ITS PLAN IN VIETNAM?

Granger: We mentioned Google earlier. Google has just purchased a building in Northern Vietnam, in Bac Ninh. They’re buying this building to build the Pixel smartphone production in Vietnam. Do you know anyone who has a Pixel smartphone? 

Cameron: I’m holding mine right now.

Granger: You’re the only guy in Vietnam.

Cameron: One of the very few. I’ve only met one other than me. And they bought it in Canada. I’ve never seen one in Vietnam that you can purchase. So, that’s very interesting.

Granger: So in the summer, Google started to work to convert an old Nokia factory in Northern Vietnam, in the province of Bac Ninh, to handle production of Pixel phones. That’s the same province where Samsung developed its smartphone supply chain a decade ago. So, there’s definitely a good supply chain there for it. And Google will have access to an experienced workforce. But will it be enough? Is the technology really there for them? I know you were talking about the Pixel has a unique design.

Cameron: Yes, it has a Bezel screen. I’m just wondering about the Nokia smartphone production. They have a couple of smartphones, but I think they’re mostly talking about the Nokia bricks when they’re talking about an old Nokia factory. So, you have a lot of costs associated with it. But the big thing is the labor pool. Samsung is the largest employer in Vietnam, and I think there is a turnover.

Granger: Well, Tet is coming up right?

Cameron: Hopefully they set up right after that.

Granger: Google is planning to ship eight to 10 million smartphones this year, double from a year ago, making Vietnam a key part of the Google expansion.

HOW CAN APPLE COMPETE WITH GOOGLE & SAMSUNG?

Granger: I love Apple Pay. Apple Pay is everywhere in the U.S and all around the world, but I don’t see it here. So I’m wondering why. If anyone out there knows why, please tell us. But you know, Samsung is a major player here, and I wonder if that has something to do with it. What are your thoughts, Cam?

Cameron: Do they have Samsung pay here? I haven’t seen Samsung Pay.

Granger: I think Samsung is rolling up their Pay. Absolutely. 

Cameron: Well, I imagine they are. When we’re talking about it back on Monday and we’ve talked about competition, I feel like Vietnam is one of the richest environments when it allows companies to exist in the same spaces. So we have Grab, we have GoJek, we have all of these other companies… Actually, one of the most interesting photos I’ve seen recently was a Go Viet driver wearing a Grab helmet and having a Bee bag on his bike. And it’s like these three ecosystems are still working together. Is it healthy? I’m not too sure. But there’s something to be said that people are doing well.

Granger: Those Grab drivers are making $1000 or $1,200 a month, right?

Cameron: Oh, it’s definitely helping them, in some respect.

Granger: Yeah, the competition, it’s great. Apple in Vietnam, it’s an important company here and I think if they’re going to become much bigger players in the market. Samsung already has about 145,000 employees here. Now we have Google coming here. You have the major players come into Vietnam. It shows the exciting growth happening in Vietnam, for sure. It does show open competition and that’s great for the economy. It’s great for the citizens of the country. And it’s great for us as consumers because we have more choices, more options. 

Granger: Well, it’s interesting. Certainly, there’s a lot going on here, as you can see, with major players in the market. We’re going to have to talk about a lot of other issues that surround these players coming here, like data centers, government requirements and will they really comply and how’s that all gonna work because there’s a lot of privacy issues and security issues… and how the government will interact with these companies coming here. It’s going to be a really exciting next couple of months to see this stuff roll out.

Granger: Thank you for joining us today and whether you use your Apple or your Samsung, or your Pixel like young Cameron, we hope it works for you.

The Lotus Talks is produced by The Vietnam Group. This episode was produced by Granger Whitelaw, Cameron Lynch and Toan Tang.

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