Annual us gdp growth

Digiworld aims to grow 25 per cent on average annually in the next decade

Two months ago, Digiworld’s executive told securities firms that a partner producing and assembling Xiaomi tech products is opening a plant in Vietnam’s northern port city Haiphong, and that the plant would commence operation in the second half of this year.

Albeit the information was not yet confirmed by Digiworld’s leadership at the company’s recent annual general shareholders’ meeting on April 4, the company’s CEO Doan Hong Viet was quoted as saying, “This is informal information; Xiaomi and Digiworld will be making an official announcement on a suitable timing in the future.”

In fact, Digiworld is the exclusive distributor of all Xiaomi products in the Vietnamese market. According to Viet, home appliances would be one of hte key segments of Digiworld by 2024 with the target of holding a “remarkable market share”, in which TV sets would secure the largest share in value.

The home appliances market, with teh main items being TV sets, refrigerators, washing machines, ovens, and the like, has been totally untouched by Digiworld until the present. Viet explained that the overly high import duty of about 15 per cent was the reason why Digiworld had yet to engage in importing products for distribution and wholesale in the Vietnamese market.

At the recent AGM, CEO Viet also lifted the curtain on Digiworld’s intention to venture into other product segments to realise the target of reaching a market cap in the billion-dollar range.

“If there was a plant assembling Xiaomi products in Vietnam, the tariff barrier would disappear, providing the bedrock for us to break into this up-and-coming segment. This will be the answer for the question how Digiworld would attain an annual growth pace averaging 25 per cent in the upcoming decade,” said Viet.

On the sidelines of Digiworld’s annual general meeting (AGM), Viet said that the company will be making an official foray into the home appliance wholesale market late this year or early next year. Hence, this new segment will make no contributions to the company’s revenue and post-tax profit targets which have been set at VND15.2 trillion ($660.87 million) and VND300 billion ($13 million) for 2021.

“Digiworld is the exclusive distributor of Xiaomi and Huawei products in Vietnam. If we succeed in grabbing about 5-10 per cent market share of the TV market, which is now valued at about VND40 trillion ($1.74 billion), that would be remarkable. For the time being, we are distributing Xiaomi items in this segment,” said Viet.

The Chinese TV market is dominated by Xiaomi. In Vietnam, the TV market belongs to three top players – Samsung, Sony, and LG.

According to figures by the Ministry of Industry and Trade’s Domestic Market Department, the domestic home appliances market is valued at about $12.5-13 billion and the purchasing demand for household electronic items and kitchen devices will remain high at least to 2025.

At the recent AGM, CEO Viet also lifted the curtain on Digiworld’s intention to venture into other product segments to realise the target of reaching a market cap in the billion-dollar range.

Accordingly, mergers and acquisitions (M&A) deals through acquiring firms possessing distribution channels which Digiworld doesn’t have is the tactic helping the company to realise its 25 per cent annual growth target.

Digiworld was also reported to have been working with several consultancy firms and “targeting” several firms for M&A but has yet to reach the stage of “making an announcement”.

Last year, consumer goods fetched Digiworld VND265 billion ($11.5 million), only 2 per cent of the company’s total revenue, fulfilling only 53 per cent of the projection.

The solution for this disappointing performance is “giving priority to finding new products as well as engaging in M&A”.

Digiworld’s putting investment into pawnshop chain Vietmoney is an example. The company has been using Vietmoney’s outlets as a lever to stimulate business activities.

Accordingly, in September 2020, Vietmoney announced wrapping up its Series A funding round from Digiworld Venture and Finnish equity fund Probus Opportunities.

These two partners were reported to co-manage a 30 per cent stake in Vietmoney and have seats at Vietmoney’s Board of Management.

According to Digiworld’s report, the partners have put VND50.5 billion ($2.2 million) to possess a 21.86 per cent stake in Vietmoney.

“To grow into a billion-dollar company, we are seeking growth across the board, from consumer goods to supplementing new brands, customers, and sales channels. We are also constantly searching for new models towards realising the target of shaping a complete consumer ecosystem,” said Nguyen Hai Khoi, Digiworld’s investment director.

Khoi shares that Vietmoney is providing personal financial solutions that could effectively serve Digiworld’s consumer goods segment.

Statistics by fintech firm FiinGroup show that around 48 per cent of the Vietnamese population have low income of below $300 per month, a potential segment for consumer lending firms.

Ube Construction Materials, a Tokyo-based wholly owned unit of chemical giant Ube Industries Ltd., said it owns a 51 percent stake in the new local arm, Ube CT Construction Materials Vietnam Co., which has an initial capital of 753,100 USD.

The rest of the stake is held by two other Japanese companies – 37.5 percent by T. Chatani & Co., a subsidiary of chemical goods trading house OG Corp., and 11.5 percent by Koatsu Gas Kogyo Co., a manufacturer of high-pressure gas.

The waterproof materials market in Vietnam is expected to expand in line with the country’s economic growth, an Ube Industries spokesman told NNA, commenting on the establishment of the new local unit as the Ube group’s first business base in Vietnam.

Ube Construction Materials was founded in 2015 and plays a central role in the group’s construction materials business.

Source: VNA

Semiconductor crisis forces top-level action. Source: freepik.com

The world’s semiconductor industry sales hit $40 billion for the month of January – a rise of 13.2 per cent on-year, revealed the Semiconductor Industry Association.

Now, consumers are having to deal with price hikes and a lack of products from automobiles and videogames to TVs and smartphones as a global shortage in semiconductors grows.

The shortage in chips, the so-called “brain” within every electronic device, has been slowly getting worse since last year, according to The Guardian. Temporary delays in supplies as factories shut down due to the coronavirus pandemic caused initial issues. However, although production is somewhat back to normal, surges in the demand driven by new habits stemming from the pandemic is causing the situation to worsen.

Mainly, a boom in sales of TVs and computers, the launch of brand new videogame consoles, and arrival of 5G-enabled mobile phones have all driven the demand.

The crisis has even affected Apple, the biggest buyer of semiconductors at $58 billion annually. It was forced to delay the launch of the iPhone 12 by two months last year as a result of the shortage.

“Chips are everything,” said Neil Campling, media and tech analyst at Mirabaud. “There is a perfect storm of supply and demand factors going on here. But there is a new level of demand that can’t be caught – everyone is in crisis and it is getting worse.”

In possibly the most shocking development, Samsung – the world’s second-largest buyer of chips – last month said it might have to postpone the launch of a high-end smartphone, despite also being the world’s second-largest producer of chips.

“It is incredible that Samsung sells $56 billion of semiconductors to others, and consumes $36 billion of them itself, finds it may have to delay the launch of one of its own products,” said Campling.

Ford meanwhile recently cancelled shifts at two car plants and said profits could be hit by up to $2.5 billion this year due to chip shortages, while Nissan is delaying output at plants in both the United States and Mexico. General Motors also said it could face a $2 billion profit hit.

In February Sony, which along with other console makers has struggled with stock shortages over the last year, said it might not hit sales targets for the new PlayStation 5 this year. Its rival, Microsoft’s Xbox, forecasts supply issues continuing at least until the second half of the year.

In a bid to unblock the jam, governments are now getting involved. CNBC reported a fortnight ago that US President Joe Biden is looking to place $37 billion into the sector in an attempt to lower America’s reliance on overseas supply chains. Biden said at the end of March, “We shouldn’t have to rely on a foreign country to provide for our people. We need to sharpen America’s competitive edge by investing here at home.”

But countries including the US and Germany have also reached out to Taiwan to help remove bottlenecks in production. Along with the pandemic, the new administration believes the semiconductor shortage was exacerbated by the previous president’s actions against China.

“Manufacturing of microelectronics in the US has reached a historic low, and this is a big problem for us,” said Terry Halvorsen, IBM’s general manager for Client and Solutions Development.

Taiwan dominates the outsourcing of semiconductor manufacturing. Its contract manufacturers together accounted for more than 60 per cent of total global revenues in the field in 2020, according to Taipei-based research firm TrendForce. Much of its dominance is due to Taiwan Semiconductor Manufacturing Co., Ltd. (TSMC), the world’s largest foundry. TSMC accounted for 54 per cent of all revenues via outsourcing of semiconductor manufacturing globally last year.

Dan Wang, a technology analyst at research firm Gavekal said, “Looking at market share, TSMC manufactures around 50 per cent of all semiconductors in the world – and I think that still understates how important it is because these are some of the most advanced chips out there.”

At the start of March, TSMC said it plans to invest $100 billion over the next three years to increase capacity. The move came after Intel Corporation’s announcement to spend $20 billion on the expansion of advanced chip-making capacity.

“Ultimately, securing the microelectronics supply chain of the US and its allies is a challenge they need to face now,” Halvorsen of IBM noted. “It’s the only way we can ensure sustainable long-term capability in this critically important area.”

The last big supply shock for the industry was a decade ago after the Fukushima earthquake damaged operations at Renesas Electronics, the number three supplier of auto chips.

Representatives of Vietnam and the UK hand over notes confirming the date when the UKVFTA comes into force. Photo: VNA

Emily Hamblin, UK consul general in Ho Chi Minh City and trade director for Vietnam, said that May 1 is the next milestone to celebrate in the United Kingdom and Vietnam’s timeline of implementing the free trade deal (UVFTA), when the agreement will legally enter into force.

However, the benefits of it have already been in place for several months, being provisionally applied from January 1. Some 65 per cent of all tariffs have already been eliminated and this will increase to 99 per cent over the next six years. This equates to tariff savings of $134.65 million per year on Vietnamese exports to the UK by full implementation, and of $42.52 million per year on UK exports to Vietnam.

Among them, there are huge cooperation opportunities in the field of healthcare. Hamblin said that in an age of growing challenges from non-communicable diseases, and emerging threats from infectious diseases such as COVID-19, digital health has the potential to offer new solutions and alleviate pressure on overstretched health systems. Digital health technology can empower patients to actively participate in their care, improve clinical outcomes, and enhance operational efficiency.

Innovation and technology have touched many aspects of life in Vietnam and healthcare is no exception. In a concerted effort to embrace Industry 4.0, the Vietnamese government has committed to a national agenda that seeks to harness the potential of digital solutions across the healthcare system. This has set a solid foundation for digital transformation in Vietnam, and the UK shares many of the same aspirations.

“We seek to utilise digital innovation to expand equitable access to quality care, in line with United Nations Sustainable Development Goal 3 on good health and wellbeing. At the early stage of digital transformation, Vietnam has plenty of opportunities to avail of innovative solutions from the UK,” Hamblin stressed.

Meanwhile, Nitin Kapoor, chairman and general director of AstraZeneca Vietnam, said, “As AstraZeneca continually strives to put patients first, we appreciate the UVFTA that is helping to ensure continued access to our innovative and high-quality medicines for millions of Vietnamese patients.

British pharmaceuticals like AstraZeneca can enjoy the increased protection and enforcement of intellectual property rights, internationalised standards and technical regulations, and enhanced transparency of policies on government procurement and reimbursement, which in turn will allow us to better serve local patients.”

Kapoor stressed that the UVFTA entering into force is especially meaningful when the UK and Vietnam are looking forward to another decade of bilateral strategic partnership, cooperating ever more closely in numerous areas, including healthcare, to strengthen the livelihoods and economic prosperity of the people.

Indeed, a number of UK healthcare investors have started to set up their presence in Vietnam. Last year London-based Real Capital London launched a $156 million Hong Anh Medical Campus project in Ho Chi Minh City. The facility will be a state-of-the-art healthcare system incorporating a 462-bed hospital, a medical training centre, a network of general practice clinics and pharmacies, and senior residencies and nursing homes, adding much needed facilities and services to Vietnam’s healthcare system.

The project is divided into four stages, with the final phase expected to be completed by 2030. The fund’s vision is to build a state-of-the-art medical campus under British standards, offering the highest standards of healthcare in Vietnam

As of present, British investors have poured $3.87 billion across over 400 projects in Vietnam and is the 15th-largest foreign investor in the country. Established British actors already here include financial services companies like HSBC, Standard Chartered Bank, and Prudential; Jardines in real estate; and healthcare companies such as AstraZeneca, GSK, and Reckitt.

In the past decade, Vietnam and the UK already enjoyed a strong growth cycle – with bilateral trade growing on average 12 per cent per year. The UVFTA is built upon that strong basis and is opening the doors to increase capital flow between the two nations, according to Hamblin.

She stressed that the UVFTA provides better market access for services, as Vietnam has committed to opening up markets beyond that set out within the World Trade Organization’s baseline, which delivers greater market access for UK service providers. These and other measures set out in the FTA represent real benefits for both businesses and consumers.

In the same vein, Kenneth Atkinson, executive chairman of Grant Thornton Vietnam and a board member of Britcham Vietnam, said that the UVFTA is one of the first signed and entered into by the UK, after leaving the European Union last year. The agreement reflects the importance both the UK and Vietnamese government place on the strategic partnership and the growing importance of the bilateral relationship.

Atkinson expected that a reduction in regulatory barriers and red tape will attract UK investors to Vietnam, particularly in the healthcare space.