Unknown supply chain

Everyone has a tough time dealing with broken laptops, PCs, or other electronic products at some point. It’s common for people to take them shops in “electronics streets” such as Thai Ha in Hanoi or Pasteur in Ho Chi Minh City.

These shops can be divided into two categories: authorized retailers, as would be found in most developed countries, and unauthorized retailers, who are private traders and expert in dealing with electronics issues.

The special thing about this second type is that the cost of their components and services are much cheaper than at an authorized retailer.

To replace a laptop keyboard these stores charge around VND80,000 ($3.60), or half of the price quoted on the Vatgia e-commerce website, of $7.10, and one-fifth of a keyboard sold by the ITC Group, which is certified by the Ministry of Industry and Trade.

But low prices always come with a cost. As unauthorized stores, the products these stores sell don’t have certificates of origin. They may be emblazoned with famous brand names such as Dell, HP, ASUS, Samsung, or LG, but they don’t come in sealed boxes.

“To be honest, the components here are imported from China and not from the brands, as a normal product from a brand would have a much higher price tag,” a repairman in a small store in Thai Ha Street said. 

Customers who come to his store for laptop repairs outnumber those coming for mobile phone repairs, he said.

This is because in Vietnam people change mobile phones quickly, at two years on average, and if a mobile phone breaks it’s more likely to be sold than repaired.

It’s the opposite for laptops, he said, as people tend to hold on them for a few years or even longer, and if they break they are brought to stores like his to be repaired.

As the use of electronic products in Vietnam rises, demand for servicing is also increasing. The existence of stores selling questionable components puts significant competitive pressure on retailers of genuine brands, according to Mr. Pham Xuan Tri, Account Manager at Digiworld.

“The supply chain for electronic products has many advantages due to increases in market demand, but the huge number of unauthorized products creates challenges, especially in pricing,” he said.

Another problem for retailers of genuine brands is that many people are unable to distinguish between an authorized product and a counterfeit product.

To compete and develop in such a market, different players take a different approach. Some brands, like ASUS and Dell, have opened representative offices in Vietnam and are taking slow and gradual steps to tackle the problem.

HP, meanwhile, has built plants in Vietnam and pushed social campaigns to raise awareness. No matter what they do, however, many customers will continue to base their purchasing decisions on their pocket.

Dealing with waste

Electronics imports in 2013 reached $17.7 billion, a 16.5 per cent increase against 2012, according to the Center for Development and Integration (CDI). Vietnam Customs put the figure at $5.5 billion for the first half of 2014.

These figures, though, do not include data from unauthorized supply chains. With the huge amount of input materials coming from many different types of suppliers, there is also a huge amount of waste being generated. From an environmental perspective this represents a major problem.

Most metals and compounds found in electronic semiconductors are harmful to the environment when disposed of improperly. This can create defects in living organisms, causing inflammation and even cancer.

Mercury poisoning, for example, can cause abdominal pains and vomiting, while arsenic poisoning is lethal. Lead adversely affects the nervous system and can cause amnesia.

At the moment, however, there is yet to be a comprehensive study conducted in Vietnam on workplace safety and hygiene in the electronics industry or programs to raise awareness about the negative effects on human health and the environment, according to Vietnam Recycles, a program on electronic waste recycling conducted by HP and Apple in Vietnam.

Brands have taken action on the matter to express their commitment to corporate social responsibility.

Leading this in Vietnam are HP and Apple with Vietnam Recycles programs, which started in April in Ho Chi Minh City and collected 320 kg of waste, and in late September in Hanoi.

“We are working with the government and partners to determine what the best approach is for all stakeholders in order to ensure that waste from electronics is managed in an environmentally-sound manner,” said Ms. Monina de Vera-Jacob, SEA Environmental Manager at HP Asia Pacific. 

Other brands have also been environmentally responsible. Dell has a more private approach, with customers needing only to call and it will come collect their electronic waste for recycling.

“Our goods follow high standards by using environmental materials and the end-life products are returned to our factory in China for recycling,” according to ASUS.

The government has approved Decision No. 16 on waste recycling, including electronic waste, which will take effect on July 1 2016.

Brands must commit to recycling, which pushes up costs. According to Ms. de Vera-Jacob, many companies in Vietnam feel that they are not required to take responsibility at the moment because of the cost, but when the Decision comes into effect they will have to follow it.

Agreeing with the policy, Mr. Tri from Digiworld said: “This is the right decision, as electronic waste has many negative impacts on life so it is necessary to handle waste properly and produce more environmentally-friendly products.”

Ms. de Vera-Jacob said that, in many European countries, laws on handling electronics waste have been in effect for 25 years.

“Manufacturers have a quota - for example if they sell 100 products they have to collect 40 per cent of old and broken products,” she said.

As this puts a huge cost on manufacturers, it took them 25 years to go from 0 per cent to the 40 per cent, she said. So it certainly won’t happen overnight in Vietnam. 

Unauthorized stores, meanwhile, are completely outside the reach of any such policy. One store owner said he had no idea about the policy and since his products are not from an authorized supply chain it won’t affect his business.

Brands will have to consider the additional costs from July 2016, and if they choose to increase their prices or service charges they will be at a disadvantage in competing against these unauthorized retailers.

As for customers, many people doubt that the recycling of electronic waste will succeed as Vietnamese people have low incomes and many will happily sell their old and broken products to either unauthorized stores or trash collectors.

Ms. de Vera-Jacob said that this is not just a problem for a developing country like Vietnam. In countries like Singapore people also want to sell their waste for a few dollars.

“The level of public awareness regarding electronics waste in Vietnam is very limited,” she added.

The problems brought about by unauthorized supply chain sand uncontrollable waste will continue until all involved pay greater attention to the matter.

But few people make the connection between the economy and the environment.