Huawei’s plunge unlikely to affect Vietnam’s smartphone market

Huawei holds only a small share in Vietnam’s market, approximately 4%, equal to VND2.7 trillion (US$113 million) in 2018.

Huawei’s plunge unlikely to affect Vietnam’s smartphone market

The blacklisted Huawei in the US market may affect the total sales of the company worldwide but not in Vietnam, because of its considerable little share and the rapid growth of alternatives in the middle-range segment, according to a recent report by brokerage VNDirect.

Huawei’s meager market share in Vietnam

Huawei is facing possible ban from selling smartphones and telecommunication infrastructure in the US, and its businesses with other software and hardware providers has been suspended.

The sanctions imposed by the US on Huawei not only affect the company’s business directly but also its smartphone users who are concerned their gadgets remain useless without access to Android’s apps including Youtube, Play Store and Google Maps.

Excluding China’s market where a number of Chinese app stores are prevalent, Huawei smartphone sales around the world may plummet and the global smartphone supply chain may fluctuate, according to VNDirect.

As the second world largest smartphone maker with 14% of global market share in 2018 is struggling with sanctions, Huawei’s rivals may take advantage and grab the chance to fill the gap left by Huawei in the world foreign markets.

Being blocked by Google makes Huawei phones less appealing in the Chinese market and Xiaomi and Oppo are considered alternatives in the cutthroat completion thanks to their similar technologies as well as affordable prices compared to those of Huawei.

In the segment of mid- to high-end smartphones, Samsung and Apple may reap considerable benefits from Huawei’s fall.

However, Apple may risk a swift retaliation as its smartphones manufactured in China may be subject to harsher tax, leading to an increase of 15% to 20% of iPhone retail prices and affecting its sales.

According to CGS-CIMB, Huawei smartphones sales outside China in 2019 are predicted to fall 40% year on year while that of Oppo and Xiaomi is expected to increase by 60% and 43% respectively.

VNDirect’s report estimated that Vietnam’s smartphone market is unlikely to be affected.

Huawei holds only a small share in Vietnam’s market, approximately 4%, equal to VND2.7 trillion (US$113 million) in 2018.

Besides, Huawei brand is not strong and consumers can switch to other alternatives such as Oppo, Xiaomi or Nokia.

 

Losers and winners in Vietnam from Huawei’s fall

FPT Digital Retail Joint Stock Company (FRT Retail) and MWG might not be affected because Huawei smartphones account for only 4% to 6% of total smartphone sales of the two retailers.

In fact, there are a number of alternatives, therefore what happens to Huawei will not mean a plunge in the retailers’ revenue.

However, both FRT and MWG may have to deal with the remaining inventories and ongoing installment contracts of Huawei smartphones.

VNDirect predicted two possible scenarios for handling the situation, (1) Huawei and its partners will share the cost and clear those inventories by reducing the price and enhance promotions, and (2) Huawei will rebuy the inventories.

In the second scenario, Samsung had the same experience with the Galaxy Note 7 due to the phone’s battery failure.

Both MWG and FRT are waiting for Huawei’s response to take the best solution.

There is even a worst case scenario which is the lengthening of US sanctions, Huawei’s phones cannot be sold and the phone maker will not offer any supporting policy for its partners.

Therefore, retailers may have to make provision for Huawei’s current products with about VND110 billion (US$4.7 million) for MWG and VND40 billion (US$1.7 million) for FPT.

However, VNDirect affirmed that even if this scenario happens, the impact would be negligible as the aforementioned provision costs are only equal to about 3.8% and 11.5% of net profit of MWG and FPT in 2018, respectively.

Digitalworld may benefit from this Huawei’s crash when it has distributed Nokia and Xiaomi products exclusively, therefore, the plunge of Huawei in Vietnam’s market may help promote the sales of Nokia and Xiaomi and other brands, VNDirect said. Hanoitimes

Ha An

 
 
 
 
 
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