_The Global Information and Communications Technology Industry: Where Vietnam Fits in GVCs_

# _Platform Leaders in Vietnam_

Platform leaders are companies that have been successful in implanting their technology (in the form of software, hardware, or combination) in the products of other companies (Gawer and Cusumano, 2002). One of the most powerful platform leaders in the global ICT industry, Intel, was one of the first electronics firms to invest in Vietnam. Intel first announced that it would be investing $300 million in an assembly and testing facility in Vietnam in January of 2006. Within ten months, the estimated figure had risen to $1 billion. Intel received significant investment incentives from the beginning, including a four-year corporate tax holiday followed by a nine-year period paying 50% of the country’s 28% corporate tax rate (Atkinson and Ezell 2012). The facility has been operational since 2010, and is still the company’s largest assembly and testing operation outside the US. The plant assembles two of Intel’s core products; the system on chip (SOC) for tablets and smartphones and the Haswell CPU, the fourth generation Intel Core Processor. While the plant is packaging cutting-edge chips for the global market, linkages to local suppliers remain weak. When the facility came online in 2010, Intel had only three Vietnamese suppliers. Today, that number is up to 16, and Intel hopes to reach higher levels of local content in the future, although the quality of local suppliers remains too low for sourcing of core inputs.<sup>14</sup> It is unclear whether or not the company has a supplier upgrading program in place.

# **The ICT Services and ICT-Enabled Services Sectors in Vietnam**

Almost all of the defining features of services: that they are non-tradable, non-storable, customized, and insensitive to price competition are changing in ways that enable and motivate international sourcing. Task fragmentation and trade in services is burgeoning, both domestically and internationally. Services have become the focus of intense international competition and dynamic innovation. With standardization, commodification, and increasing scale, labor inputs to services have become more sensitive to costs, providing enterprises with the motivation to take advantage of the new domestic and international sourcing options for a wide range of services and business functions, including software coding, “back office” administrative tasks, sales, customer service, and even elements of R&D.

While ICT services (software and enterprise computing) and ICT-enabled services (BPO and digital content) are promising sources of growth and competitiveness for Vietnam, detailed, internationally comparable statistics on these ICT sub-sectors are not readily available. There is no harmonized and internationally agreed upon definition of what constitutes ICT-enabled services, nor does the Vietnamese government collect systematic data on this segment of the ICT sector. As a result, available data on ICT services in Vietnam vary by source. The Government Statistical Office (GSO), the Ministry of Information and Communication (MIC), and key industry associations offer different figures for number of firms, revenue, and employment. An executive at a software outsourcing firm interviewed for this study claimed that none of these data sources was accurate. Data-related issues will be discussed at greater length in the section on policy recommendations.

Nevertheless, from the disparate data sources available, we can surmise that Vietnam’s role in these segments of the ICT sector has expanded considerably. According to the Vietnam Software Association (VINASA), which publishes data from the MIC and other sources, the software sector generated $2.7 billion from software and IT services in 2013; $1.3 billion from software and $1.4 billion from digital content.<sup>15</sup> Employment stood at 88,820 in software and 67,680 in digital

> 14 See Tuoi Tre News article for details <u>http://tuoitrenews.vn/business/21324/80-of-worlds-computer-chipswill-be-made-by-intel-vietnam-by-2015-ceo.</u>

> 15 VINASA counts on 240 member companies that account for 70% of Vietnam’s software production and 60% of its software workforce. Data available from <u>http://goglobal.jisa.or.jp/Portals/0/data/library/20120718_000042/VINASA_Vietnam.pdf.</u>

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