Vietnam Technology: Global Aspirations, Resilience And Growth
Amid economic uncertainties, Vietnam’s economy expanded by 8.0% in 2022, while the Information Telecommunication (ICT) sector experienced phenomenal growth of 8.8% compared to 2021.
The origins of Vietnam technology traced back to the mid-1980s during the period of ??i M?i reforms. Since then, Vietnam’s economy has made a shift from a centralized economy to a mixed and globally integrated economy. In harmony with the country’s global orientation, Vietnam’s ICT sector has made it global and become one of the best prospective sectors of the country.
In this article, we will learn about the landscape, challenges, opportunities, and future outlook of Vietnam’s IT sector. By understanding its current status, drivers, and restraints, businesses can lean on its favorable conditions and make informed decisions to enter the market or expand your businesses to Vietnam
Vietnam’s Socio-Economic Landscape
Vietnam has diverse micro and macro conditions to drive economic development and technological innovation.
Vietnam spans the heart of Southeast Asia and Asia-Pacific (APAC) – Two of the world’s most dynamic regions for economic exchanges and tech startups. Over its 40 years of developing toward global integration, the country has gained relative economic power in the region.
As of 2022, Vietnam was the 35th-largest among the major economies by gross domestic product (GDP) and 26th-largest worldwide by purchasing power parity (PPP).
Business environment in Vietnam
Vietnam is in its golden population era. As of Q1 2023, the country has a population of about 98.8 million, including 52.2 million people participating in the labor force. About 70% of the population are internet users, backed by a 98,4% 4G coverage. Undoubtedly, a large and digital-savvy labor force will be a significant driving factor for economic growth.
Furthermore, Vietnam has a stable society where religions beautifully co-exist under the governance of a single political party.
With this firm social fabric, coupled with the government’s support, the business environment in Vietnam was recognized in the top 21 worldwide in 2022.
As a result, Vietnam has become a global production house for multinational tech giants such as Samsung and Intel, attracting 18 billion USD in foreign direct investment (FDI) in the first 8 months of 2023 alone.
Technological innovation and Digital transformation in Vietnam
In terms of technological innovation, Vietnam’s startup ecosystem has been booming in harmony with the digital momentum of the APAC region.
In 2016, the Vietnamese government approved the project “Supporting the National Innovation Startup Ecosystem until 2025”. Let numbers speak results, the country now has around 3,800 startups with 4 unicorns and 11 valued at over USD 100 million.
Apart from that, starting in 2020, Vietnam’s government implemented the “National Digital Transformation Program” through 2025, with vision to 2030. The program aims to develop the digital economy, digital society, and digital citizens, and establish Vietnamese digital businesses with global capacity.
With a clear vision and strategy, the program is setting a solid foundation for Vietnam to become a regional digital hub in the APAC region by 2030.
Vietnam To Become A Leading Software Hub In Southeast Asia
In recent years, Vietnam has emerged as a favorable IT outsourcing destination for businesses in APAC, Europe, and North America. Key advancements in technological capabilities and digital infrastructure, coupled with competitive production costs have positioned Vietnam as a potential major player in the global IT market.
Below, you’ll find significant statistics and information that consolidate the potency of Vietnam’s technology sector.
Vietnam Technology Sector Statistics
Global Presence
After two decades of going global, Vietnam has affirmed its position as a premier IT service vendor on the global technology map. It has become the 2nd-most favorite technology partner of the Japanese market since 2014 and also gained recognition in major markets like the United States, Europe, South Korea, Hong Kong, and Australia.
Check out IT juggernauts in Vietnam:
Major Tech Hubs in Vietnam
For decades, Ho Chi Minh City (HCMC) and Hanoi have been primary tech hubs in Vietnam. In addition, in recent years, we have seen Da Nang emerge as a new promising land for tech business settlements, while Quy Nhon become an ideal place for technological research and development (R&D), especially for AI.
Looking toward the future, Hanoi and Ho Chi Minh City will continue to be the main driving force behind Vietnam’s startup ecosystem. Meanwhile, Danang will gradually become an ideal alternative for businesses seeking lower operation costs and Quy Nhon is turning into the AI valley of Vietnam.
Interested in exploring Vietnam’s IT sector? Find details in our Ebook Vietnam’s IT Services Industry: Landscape, Challenges, Opportunities.?
Leading Subsectors Of The IT Industry In Vietnam
Both the public and private sectors in Vietnam are inclining towards adopting ICT solutions. Below, you will get to know the top 5 prospective technology subsectors that benefit from digital transformation in Vietnam.
1. Smart City
The smart city concept was first introduced in Vietnam in 2017 by the Ministry of Construction. One year later, the Vietnamese government approved the project “Developing Sustainable Smart Cities in Vietnam in the 2018 – 2025 period, with vision to 2030”.
To date, 54 among 63 cities and provinces in Vietnam have been approved to develop a smart city. Among these, 10 have already formed partnerships with both local and global vendors to implement smart cities.
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2. Financial Technology (FinTech)
In 2019, Vietnam’s FinTech sector ranked 2nd in ASEAN in terms of funding, attracting 36% of all of the region’s fintech investment. According to a representative of Robocash Group, Vietnam’s FinTech market size is anticipated to hit 18 billion USD by 2024.
There are over 150 FinTech companies in Vietnam, with a strong focus on e-wallet payments and peer-to-peer lending. In addition to traditional FinTech, several Vietnamese players gained recognition in the decentralized finance market (DeFi) such as Coin98, Sky Mavis, and TomoChain.
3. Education Technology (EdTech)
Vietnam’s EdTech market is estimated to reach 3 billion USD in 2023.
Vietnam’s EdTech market for individual learners shows a strong promise with a natural emphasis on education among Vietnamese parents, coupled with the Covid-19 pandemic effect, as well as a 73.5% smartphone usage rate and a 98.4% 4G coverage.
On a national scale, digital transformation is happening in Vietnam’s educational system, especially in Ho Chi Minh City and Hanoi, with a strong focus on IT and AI applications. Still, the percentage of Vietnamese students and teachers who have technology in classrooms is considered less than 5 percent. This is so humble compared to neighboring countries like Singapore (at around 80%) and Japan (at around 70%), leaving a huge room for growth.
4. Cybersecurity
With the thriving technology adoption across different vertical industries, Vietnam is becoming a promising market for cybersecurity solutions and security services. According to Statista, revenue in the Vietnam cybersecurity market is projected to reach 269.1 million USD in 2023.
Besides, as the country pursues various projects in e-government and smart cities throughout the National Digital Transformation Program, Vietnam’s digital economy will continue to grow and trigger higher demand for cybersecurity.
5. Telecommunications
Vietnam currently has ~78 million internet users and 91.3 million smartphone subscribers, with an estimated 6.3 million 5G subscribers in 2025. These, coupled with increasing government investment in higher-quality wireless internet services, have fueled the growth of the Vietnam telecom market.
The Vietnam telecom services market size was valued at $6.3 billion in 2022. The key players in the market include Vietnamobile, Viettel, EVNTelecom, AT&T, and MobiFone.
Opportunities In Vietnam’s IT Industry
Both the advantages and limitations of the technology industry in Vietnam present opportunities for foreign businesses.
The Vietnamese government and many vertical industries are presenting great demand for services and solutions in digital transformation, smart cities, cybersecurity, etc. The country is expected to continue to import the bulk of software, services, and solutions, as there are a few domestic suppliers familiar with 4.0 technologies.
As a result, foreign suppliers have opportunities to sell their technological products and services to many market segments in Vietnam, as well as offer training services for new IT skills.
The country also provides a favorable business environment with a golden labor force, competitive production costs, and a welcoming policy for international businesses. These, coupled with a strategic location in the Southeast Asian market, have made Vietnam an attractive destination for foreign tech companies to invest in or locate their businesses.
Apart from that, Vietnam has ~10,000 IT service companies with core competencies lay on software development and software testing. Therefore, apart from outsourcing software development to Vietnam, foreign tech companies with good R&D and design capabilities can consider having Vietnamese tech partners. So that both sides can extend the service lines along the software industry value chain.
Interested in exploring opportunities in Vietnam’s IT sector? Find details in our Ebook Vietnam’s IT Services Industry: Landscape, Challenges, Opportunities.
Strategies For Successful IT Market Entry In Vietnam
Entering the Vietnam IT market can be a lucrative opportunity thanks to its growing digital economy, skilled workforce, and increasing technology adoption. However, it also presents challenges that need fighting off strategically.
Here’s a guide to successful market entry in Vietnam’s IT industry.
Thoroughly Research the Market
First of all, you should know your market. By proactively researching the market demand and competitor landscape, you will get a thorough understanding of the software industry in Vietnam. From that, set a practical foundation for your market entry strategy.
Navigating The Regulatory Landscape
Unfortunately, Vietnam’s inconsistent and complex regulations remain a challenge for foreign businesses. Particularly, different ministries and provinces in Vietnam might have their own way of regulating or interpreting the same legal matters.
Here are LTS Group’s recommendations for you to navigate Vietnam’s regulatory landscape:
Leverage The Power of Collaboration
Having a trusted local partner in your industry will help a lot when entering a new market, no except for Vietnam. The partner can provide you with insights into the local regulations, local culture, consumer behavior, market trends, and so on.
At LTS Group, we’ve helped several South Korean tech partners establish operations and achieve successful market entry in Vietnam. One such partner commenced operations in 2017, their business continues to thrive now.
Need help in setting up business operations in Vietnam? Talk to our advisors now.
What The Future Holds For Vietnam’s Tech Industry
The future of the Vietnam tech industry holds significant promise, driven by massive demand from a thriving Vietnamese digital economy and a booming global IT market.
At the same time, it is backed by a young and vibrant labor force, a favorable business environment, significant government investment in digital infrastructure, and collaborative efforts on a national scale.
Furthermore, Vietnamese tech companies are increasing R&D investment for high-value Vietnam’s IT services. In the next years, we can expect to see more Vietnam IT companies climbing up the software industry value chain with premier consulting and design capabilities, as well as world-renowned software products.
On the other hand, complex regulations, moderate English proficiency, and limited high-tech capabilities remain restraints for Vietnam’s IT sector. The country will need relative efforts to simplify administrative procedures for foreign investors as well as enhance its global competitiveness.
For further details on Vietnam’s IT industry, check out our ebook Vietnam’s IT Services Industry: Landscape, Challenges, Opportunities.
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