electronic components industry report in q1/2018

1

ELECTRONIC COMPONENTS INDUSTRY REPORT IN Q1/2018

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Content

Section Page Section Page

Abbreviations 3 2.2.2. Value chains in electronics industry 26

Executive summary 4 2.2.3. Production 30

1. Business environment 6 2.2.4. Consumption 39

1.1. Macroeconomic situation 6 2.2.5. Import and export 42

1.2. Legal framework 13 2.3. Industry development planning 52

2. Industry overview 19 2.4. Outlook and forecasts 57

2.1. Global market 20 2.4.1. Driving forces for industry development 58

2.1.1. Production and consumption 21 3. Enterprise analysis 62

2.2. Vietnam market 24 3.1. Introduction of enterprises 63

2.2.1. History of industry establishment and development 25 3.2. Financial analysis 66

3

Abbreviations

CIEM Central Institute for Economic Management SIA Semiconductor Industry Association

IT Information technology SIDEC Supporting industries development enterprises center

SI Supporting industries IP Intellectual Property

HT High technology SMT Surface Mount Technology

EI Electronic industry SMD Surface Mount Device

DBS Development bank of Singapore IP Industrial production

FIA Foreign investment agency MC Multinational corporations

FTA Free trade agreements GSO GENERAL STATISTICS OFFICE of VIET NAM

VA Value added GDVC General Department of Vietnam Customs

JEITAJapan Electronics and Information Technology

Industries AssociationLtd Limited

JETRO Japan External Trade Organization TPP Trans-Pacific Partnership Agreement

IA Industrial area VEIA Vietnam Electronic Industries Association

MFN Most favored nation WTO World Trade Organization

SBV State Bank of Vietnam WTST Trung tâm thống kê thương mại chất bán dẫn

NBS Nation Bureau of Statistics of the People's Republic of China

4

Executive Summary

•

Vietnam is shifting its industry to processing and manufacturing sectors, reducing its reliance on mining because of increasingly depleted natural

resources and more difficult conditions for mining and also fluctuating prices.

• The world electronics market has long been dominated by industrialized countries such as the United States, Japan and some EU countries.

THE CONTENT IS INTENTIONALLY REMOVED FOR DEMO

PURPOSE

5

• Supporting industries, components production in Vietnam has not developed because this is a sector that requires large capital investment.

• Vietnam's participation in many trade agreements in the future will help attract foreign investment, especially for direct investment, promote

technology transfer, improve the level of business management, and increase productivity of business.


PURPOSE

Executive Summary

6

Content

1 Business environment

1.1 Macroeconomic situation

1.2 Legal framework

7

1. Business environment


Sources: VIRAC, GSO

Sources: VIRAC, GSO

• Gross domestic product in 2017 is estimated to increase by 6.81%

compared to 2016.

•

In 2017, although mining declined sharply from the previous

year, industrial production continued to grow positively thanks to the

contribution of the processing and manufacturing industry.

Billion VND

Production value of the electronics industry, 2009-2017e

GDP growth rate, 2011 – 2017


PURPOSE

8

Average interest rates have the tendency to decrease

In 2017, the VND / USD exchange rate was quite stable around VND

22,400.

%

Sources: VIRAC, SBV

VND/USD exchange rates, 2013 – December/2017

Interest rates, 2011 – 2017

Sources: VIRAC, GSO




PURPOSE

9

• The gold population structure with the population in the working age by the end of 2017 is still high with 54.8 million people accounting for 58.5% of

the total population of Vietnam, which is one of the competitive advantages of Vietnam compared with the trend of aging population of the world

today.

Labor productivity in Vietnam, 2011-2017e

Sources: VIRAC, GSO

Million VND/laborTotal population and population structure in working age from

2010 to 2017

Sources: VIRAC, GSO

Million people




PURPOSE

10

Vietnam is gradually becoming a

factory producing and assembling components for electronic products of many

big companies in the world such as Samsung, LG, Canon, Toshiba

The proportion of import-export value of electronics, computers,

phones and components, 2010 – 2017e

Sources: VIRAC, GDVC

Billion USD


Most imported goods, 2017e


Billion VND

Most exported goods

, 2017e




PURPOSE

11

• FDI in 2017 has a strong growth

Sources: VIRAC, FIA

Sources: VIRAC, FIA

Billion USD

FDI attraction by sectors, 2017e

FDI capital, 2015-2017

• In 2017, foreign investors invested in 19 industries,




PURPOSE

12

Major FDI projects in electronics industry of Vietnam

Sources: VIRAC, SIDEC, FIA

No. Projects LocationInvestment

capitalMain products Operating year

1

2

3

4

5

6

7

8

9

10




PURPOSE

13

Content

1 Business environment


1.2 Legal framework


1.2 Legal framework

14

1.2.1. Tax polices

In terms of import and export

In terms of value added tax


PURPOSE

15

1.2.1. Tax policies

In terms of corporation tax

1.2.2 Labor policies


1.2 Legal framework


PURPOSE

16

1.2.3 Credit policies

1.2.4. Land policies


1.2 Legal framework


PURPOSE

17

1.2.5 Technology policies


1.2 Legal framework


PURPOSE

18

1.2.6. Policies related to environment and food safety

1.2.7. Other policies


1.2 Legal framework


PURPOSE

19

Content

2 Industry overview

2.1 Global market

2.2 Vietnam market

2.3 Industry development planning

2.4 Outlook and forecasts

20

Total production value has increased sharply since 2012, but there are signs of

slowing down since 2014. Semiconductor equipment accounts for a large share of

global electronic components production, which is in surplus situation and falling in

demand.

Sources: VIRAC, JEITA, SIA

• The semiconductor industry contributes over 60% of the structure of production

value of electronic component industry in the period of 2010-2016.

Sources: VIRAC, JEITA

Billion USD

Billion USD

Total production value of electronic component

worldwide, 2010 – 2016f

Production value and consumption of

semiconductor equipment, 2010 – 2016f

2 . Industry overview

2.1. Global market – 2.1.1 Production and consumption


PURPOSE

21

• Over the past two decades, industrialized nations have turned to

manufacture low and middle integrated electronic components in

developing countries through foreign investment to establish facilities.

Sources: VIRAC, SIA

Sources: VIRAC, WSTS

Growth rate %Billion USD

Market share of semiconductor devices, 2016e

Sales of semiconductor devices by type of products, 2016e


PURPOSE



22

Consumption of passive components by quarter, 2012 - 2016

In addition to the semiconductor devices (which belongs to active component group), the other group also accounts for a large proportion of passive

components including capacitors, resistors, inductors and transformers, switches and printed circuit boards (PCs).

Sources: VIRAC, Paumanok Publications, Inc.

Million USD


PURPOSE



23

Input price (aluminum, copper, iron) for electronic

components, 2012 - 2017

Sources: VIRAC, Worldbank

USD/mt USD/dmtu

Input price (gold, silver, palladium) for electronic components,

2012 - 2017

Sources: VIRAC, Worldbank

USD/troy oz USD/troy oz

Prices of important input materials for producing

electronic components in 2017 tend to be reversed and sharply increased.


PURPOSE



24

Content

2 Industry overview

2.1 Global market

2.2 Vietnam market



• Most of these factories produce household electronics, making joint venture with

Japanese companies such as Sony, National, Sanyo, etc. and some small repairing enterprises. These factories together with some factories in the North

formed the nascent electronics industry of Vietnam at this time.

25

2. Industry overview

2.2. Vietnam market– 2.2.1. History of industry establishment and development


PURPOSE

26

Value chain of electronics industry

Sources: VIRAC collected

•

With simple assembly work,

Vietnam's productivity in electronic products now

accounts for an average of 5-10% of the product value


2.2. Vietnam market – 2.2.2. Value chains in electronics industry - Vietnam's position in the electronic supply chain


PURPOSE

27

• The locally-made electronic components are growing, but underdeveloped, the localization rate of electronic products is very low, on average 13%,

which are mainly packages with plastic and simple metal parts

Sources: VIRAC collected

The localization rate of Japanese electronics companies in some countries, 2015


2.2. Vietnam market – 2.2.2. Value chains in electronics industry - Localization rate of Vietnam electronics industry


PURPOSE

28

• Vietnamese enterprises have not yet provided specific electronic parts for the electronics industry.

Global value chain of Sam Sung and Vietnam

Sources: VIRAC tổng hợp


2.2. Vietnam market – 2.2.2. Value chains in electronics industry - Localization rate of Vietnam electronics industry


PURPOSE

29

No. Problem Main assessment

Requirements of multinational corporations for components vendors• According to the standard of modern production management,

the competitiveness of the components and accessories depends

on three basic factors: quality, cost and delivery time (QCD).

Sources: VIRAC, SIDEC

• Causes of the weakness of the electronic components industry in Vietnam:


2.2. Vietnam market – 2.2.2. Value chains in electronics industry – The reasons why Vietnamese enterprises remain outside the supply chain


PURPOSE

30

• However, the production of auxiliary products in general and

electronic components in particular is not encouraged.Sources: VIRAC, SIDEC


Billion VND

Production value of electronics component industry, 2011 – 2017e

Production structure of the electronics industry, 2015


2.2. Vietnam market – 2.2.3 Production


PURPOSE

%

31

• According to a report by the Ministry of Industry and Trade, the Index-

Industry Products of electronic components in 2017 fluctuated, especially

in February because of the Tet holiday, all production activities stagnated,

however, it gradually recovered and increased sharply in Q3 and Q4 of

2017.

• Supporting industries, components production in Vietnam has not

developed because this is a sector that requires large capital investment

Nguồn: VIRAC, SIDEC

Sources: VIRAC , GSO

Monthly Index-Industry Products of electronic component industry,

2016 – 2017(Calculated by original year 2010)

Supply structure of electronic components in 2015


PURPOSE



32

Sources: VIRAC, GSO

Name of the components Đơn vị 2010 2011 2012 2013 2014 2015 2016 2017e

Production of electronic components in Vietnam, 2010 – 2017e

• The production of electronic components increased sharply with the participation of many large electronic corporations, Vietnam electronics industry

in general and supporting industries in particular will continue to attract a large number of enterprises.


PURPOSE



33

Sources: VIRAC, GSO

Production of mobile phones over the months, 2016-2017

Million phones

The structure of phone production in Vietnam is concentrated in Bac Ninh

and Thai Nguyen.

The structure of phone production in Vietnam by region, 2017

Sources: VIRAC, GSO

Million phones


PURPOSE



34

Name of products Unit Made in 2017

Nguồn: VIRAC, GSO

Production of some types of computers, electronic products and components by region, 2017


PURPOSE



35

According to primary data from the General Statistics Office, in 2017, output of various types of electronics and components reached a high level.


PURPOSE



36

• In the past few years, instead of being taken over, many Vietnamese companies

have done the opposite things, which is spending money to own foreign

enterprises, typically Duc Long Gia Lai Group.

Sources: VIRAC, GSO

Sources: VIRAC, GSO

Number of enterprises and laborers in the electronic components

industry, 2010 - 2016

Classification of electronic components businesses by region, 2016


PURPOSE



37

Sources: VIRAC, GSO

Sources: VIRAC, GSO

• The revenue of electronic components enterprises has been growing

continuously over the years due to the expansion of production activities of

domestic and FDI enterprises. At the same time, the consumption market

has been extended to many countries and areas.

Trillion VND

Trillion VND

Revenue and profit of electronic components business, 2010 - 2016

Total investment capital and fixed assets of

electronic component industry


PURPOSE



38

Company name Country Location

Investment

capital

(million USD)

Production Capacity / Sector

Some FDI projects invested in electronic components industry, 2014 - 2016

Source: VIRAC


PURPOSE



39

• The proportion of smartphone users compared to regular phones in major

cities tends to increase steadily between 2012 and 2017.

Sources: VIRAC, GSO

Million USD

Consumption of electronic component, 2010 – 2017e

Sources: VIRAC, Nielsen

Rate of using smart phones in Vietnam by region, 2017


2.2. Vietnam market – 2.2.4 Consumption


PURPOSE

40

Source: VIRAC

• In the top 10 enterprises have the largest revenue of electronic component

industry, there is no contribution of domestic enterprises but they are from

FDI enterprises of Korea, Japan, etc.


Billion VND

Major customers of electronic components industry, 2015

Top 10 largest electronic component enterprises in revenue of 2016


PURPOSE



41

• Multinational corporations specializing in the manufacture of electronic

products also have a high demand for electronic components.


No. Name of component Material, technology Amount/month

1

2

3

4


Demand for electronic components of Canon Vietnam

Demand for electronic components of Intel

Direc

Indirect


PURPOSE



42


2.2. Vietnam market – 2.2.5 Import and export – Types of phone and components


• Phone and component exports in 2017 reached 45.27 billion USD,

• In 2017, exports of phones and components to most of the markets

have an increasing turnover, while there are 10 markets have export

turnover decreased compared to the previous year.

Exports of all types of phones and components of Vietnam

through months from 2015 to 2017


Billion USD

Structure of phone and component export market, 2017


PURPOSE

43


%Million USD

Vietnam's cell phone exports, 2017

Vietnam’s phone component exports, 2017


Million USD %

In 2017, Viet Nam exported cell phones with total turnover of 29.76 billion

USD,

In 2017, the total export turnover of phone components in Vietnam

reached over 15.5 billion USD,


PURPOSE



44

In the coming time, Vietnam's phone exports will face

more challenges, especially in Southeast Asia market

No. Company name

Top 20 enterprises export all types of phones and components with

over 5 million USD of turnover, 2017



PURPOSE



45

Sources: VIRAC, Uncomtrade, GDVC

Imports of phones and component,

2010 – 2017eMillion USD

• In terms of import from the FDI enterprises

• By the end of 2017, import turnover of phones and components of Vietnam

from China has reached the highest level, accounting for 53.38%.


Supply market structure of phone and phone components to

Vietnam, 2017


PURPOSE



46


Imports of phones and components, 2017

Million USD

No. Company name

Top 20 enterprises import all types of phones and components with

over 10 million USD of turnover, 2017


Vietnam mainly imports phone components from South Korea, China and

Hong Kong


PURPOSE



47

By the end of 2017, export turnover of computers, electronic products

and components has reached 25.94 billion USD,


Export structure of computers, electronic products and

components by enterprises of Vietnam, 2017

Exports of computers, electronic products and components of

Vietnam, 2010 – 2017


Billion USD %


2.2. Vietnam market – 2.2.5 Import and export – Computers, electronic products and components


PURPOSE

48

• Export turnover of computers, electronic products and components of Vietnam to China in 2017 reached


Top 10 export markets of computers, electronic products and

components of Vietnam, 2017e

Unit: Million USD

Top 10 export items with the highest FDI, 2017e



PURPOSE



49

Imports of computers, electronic products and components of Vietnam over the months, 2016-2017


Billion USD

•

The large trade deficit is the result of the slow development of supporting industries, the

expansion of foreign investment to the domestic economic sector is still weak and need to be overcome.


PURPOSE



50

Top 10 markets supply computers, electronic products and components of Vietnam, 2017


• Imports of computers, electronic products and components from the South Korean market in 2017 reached


PURPOSE



51

Types

In 2017

(Million

USD)

Compared

to the

same

period in

2016 (%)

Proportion

in 2017(%)

No. Company name

Top 20 enterprises import computers, electronic products and

components with high turnover, 2017Imported computers, electronic products and components, 2017

Sources: VIRAC, GDVC Sources: VIRAC, GDVC


PURPOSE



52

Content

2 Industry overview

2.1 Global market

2.2 Vietnam market



53

On January/18th/2017, the Prime Minister has issued Decision No. 68 / QD-TTg on Supporting Industry Development Program from 2016 to 2025.


2.3. Industry development planning


PURPOSE

54

• Specifically for electrical and electronic component sector:


PURPOSE



55

Until 2020


PURPOSE



56

Until 2030


PURPOSE



57

Content

2 Industry overview

2.1 Global market

2.2 Vietnam market




2.4 Outlook and forecasts – 2.4.1 Driving forces for industry development

58

From the general situation of electronic components industry in the world


PURPOSE

59

From geographic location and population of Vietnam


PURPOSE



60

From the Government of Vietnam

From the potential demand of the domestic marketNumber of smart phones and function phones, 2013-2019e

Sources: VIRAC, GfK

Million phones


PURPOSE



61

•

Thus, the domestic market

has a huge growth potential for e-businesses, thereby boosting

electronic production, which is the driving force for the electronics

manufacturing industry. Sources: VIRAC, GfK

Billion VND

Revenue of domestic electronics technology groups, 2017

Sources: VIRAC, GfK

Trillion VND

Revenue and growth of electronics market in Vietnam,

Q3/2014 – Q4/2017


PURPOSE



62

Content

3 Enterprise analysis

3.1 Introduction of enterprises

3.2 Financial analysis

63


3.1. Introduction of enterprises


PURPOSE

64




PURPOSE

65




PURPOSE

66

Content


3.1 Introduction of enterprises

3.2 Financial analysis

67

• Most of the companies in the group have sales growth in 2016

compared to 2015

• Gross profit margin of the enterprises in the group is very low.

Billion VND

Source: VIRAC

Sources: VIRAC

Net revenue from sales and services, 2015 - 2016

Billion VND

Gross profit and gross profit margin of enterprises, 2016


3.2. Enterprise analysis


PURPOSE

68

Enterprises Cost of salesEnterprise cost

management

Net

revenue

Cost of

sales/net

revenue

ECM/net

revenue

Foster Electric

Vietnam

Doosung Tech

Vietnam

Hosiden Vietnam

Intel Products

Vietnam

Saigon STEC

Sumiden Vietnam

Meiko Vietnam

Haesung Vina

Cost of sales and enterprise cost managementUnit: Billion VND

Billion VND

Source: VIRAC

Source: VIRAC

Asset structure, 2016




PURPOSE

69

• Capital structure of most companies in the group is paying debt,

mainly borrowing and short-term debt. Billion VND

Source: VIRAC

Source: VIRAC

Capital structure, 2016

Solvency, 2016




PURPOSE

70

ROS ROA ROE

Profit-

after-tax

(billion

USD)

Net

revenue

(billion

USD)

Average

owner’s

equity(billion

USD)

Total average

asset (billion

USD)

Foster Electric

Vietnam

Doosung Tech

Vietnam

Hosiden

Vietnam

Intel Products

Vietnam

Saigon STEC

Sumiden

Vietnam

Meiko Vietnam

Haesung Vina

Source: VIRAC

Source: VIRAC

Indicators of performance assessment, 2016

Efficiency of asset using, 2016




PURPOSE

108

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electronic components industry report in q1/2018

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