Foreign firms cash in as Vietnamese TV producers "fall flat'

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Shoppers ponder CRT television sets at a Thien Hoa Electronics outlet in Ho Chi Minh City's District 10.

A miscalculation of local demand has seen many Vietnamese producers pull out of low-end television set production too soon, ceding the market to foreign manufacturers, experts say.

As consumers continue to favor flat-panel displays, especially liquid crystal displays (LCDs), manufactures of CRT, or cathode ray tube televisions have been struggling with shrinking demand all over the world.

But experts say local manufacturers acted in haste when they ended production of CRT televisions in the country, when many families cannot afford even low-priced TV sets.

"Global CRT television consumption has in fact declined by 30-40 percent annually in recent years, but sales are still good in many countries where incomes remain low," said Do Khoa Tan, director of Viettronics Bien Hoa Joint Stock Company.

Tan said 50 million CRT sets are expected to be sold around the world this year and Vietnamese consumers alone will buy one million sets. With CRT televisions priced at US$80 apiece on average, this means sales revenues of $80 million.

An expert, who wished to remain unnamed, said CRT television production was still profitable in Vietnam. Large brands such as Samsung, LG and Panasonic keep manufacturing CRT products in the country as they see the opportunity here, he said.

Together the three companies have sold around 440,000 CRT televisions in Vietnam so far this year. Meanwhile, Sharp Electronics Vietnam imported some 30,000 CRT sets to the country in the first four months.

Cheap products

But while foreign companies see profitability in the segment, major Vietnamese electronics producers including VTB and Hanel have already moved on with new technologies. As a result, local companies now only hold 20 percent of CRT television sales.

Tran Van Sam, director of Dong A Company, one of the remaining local manufacturers of CRT televisions, believes the technology will survive in Vietnam for at least another decade.

"Any technology will have to decline sometime," he said. "Many large companies have dropped the technology because for them it's out of date. But for me, this is a segment that I can invest in."

Sam, who used to sell electronic components at a market in Ho Chi Minh City, said he started the business when he noticed that the components were really cheap and he could produce televisions at half the price offered by other brands. He wanted to target low-income consumers.

Since its first television set entered the market in July 2007 under the brand name Sam, Dong A has seen sales rise steadily. In the first five months this year the company sold around 200,000 televisions, mainly 21-inch models that cost around $60, he said.

Although the company has already prepared for LCD production, that's a plan for the future.

"I can say that we can produce LCDs right now, but the timing is not right," Sam said.

"Components (for LCD production) are still expensive. If we want to compete against big brands, we have to make sure we can offer lower prices.

"The problem is, if they sell products worldwide and their prices are not low, how can we have cheaper products when we manufacture only several thousand?"

Lack of vision

Not all local manufacturers have paid attention to building their own brand or making long-term plans for production like Dong A.

For many Vietnamese electronics companies, the main job is to undertake contract work and assemble products for larger firms. Some of them have decided to stop investing in any new products.

The result is that the local consumer electronics industry is now driven by foreign manufacturers.

Official statistics show that Vietnam's electronics exports increased 39.1 percent to $985 million in the first four months this year, but industry insiders note that most of the exporters were foreign-invested firms like Fujitsu, Canon or Samsung.

"Vietnam has missed a chance to develop light industry, particularly the electronics sector," said Le Van Chinh, consultant to HCMC-based Soncamedia.

During the 1995-2000 period, many foreign electronics firms came to Vietnam and set up joint ventures with local producers. Vietnamese firms should have seized the chance then to build production lines, but instead they chose to build assembly lines to save money, and more importantly, benefit from low tax rates on imported components, he said.

"That was a lack of vision," Chinh said.

"Many people say that it was not really necessary to build CRT television production lines then as the product will soon become obsolete anyway. But it should be noted that the technologies can be upgraded to produce LCD panels and many other products on the same lines."

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