We have mentioned Vietnamese conglomerate VinGroup (VIC.HOSE) a number of times in reference to the smartphone business, not as much in reference to Vietnam becoming an assembler of smartphones for major brands like Samsung and others, but as a competitor that is trying to build a smartphone brand business based on establishing a presence in its home country. While a small retail seller of dried fruits when it began 27 years ago, the company has grown to over 43,000 employees and has dozens of subsidiaries ranging from real estate and shopping malls to farming to amusement parks, along with the largest capitalization of any native company in Vietnam (and 2nd only to two banks as to assets).
Back in 2018 VinGroup formed VinSmart (pvt), a subsidiary devoted to the smartphone market and released 4 models by the end of 2018, which ranged in price from $107 to $285, came in only two colors (black and white) and were relatively simple devices with one or two cameras, but were based on Qualcomm (QCOM) chipsets and tested by Qualcomm for quality. Since the company had a vast retail empire they were able to offer both an unusually long warranty (18 months) with over 500 customer centers across the country and initially offered the phones at what they called a “3 No” price policy, which meant that the product would be sold at cost + selling cost, without depreciation, interest, or any financial costs.
At the onset the company used Chinese ODMs and assembled some of the products but began setting up R&D centers in the US, Korea, Japan, China, Israel, and Singapore to work with local product developers. The company began to develop and produce its own phones this year, releasing the $177 Live 4 model and had expected to launch two more lower-priced models in 1H, but the releases were delayed by COVID-19, however the company’s factory in Hanoi can currently produce 26m smartphones/year with a target, after expansion, of 125m.
VinGroup has recently announced its intention to issue ~$303m of domestic bonds to finance both its automobile and smartphone businesses, and while the bulk of the capital will allegedly go toward the automotive business, VinGroup, or one of its subsidiaries is considered to be a front-runner in the potential purchase of LG Electronics’ (066570.KS) mobile phone business, which has been losing money for years. Vingroup has worked directly with LG as far back as 2012, with the development and production of LG’s Nexus series of smartphones. That said, Google (GOOG), Facebook (FB) and Volkswagen (VOW.GR) have all been mentioned as possible suitors for the LG mobile division.
Given the almost limitless capital available to Google and Facebook, we expect VinGroup will have trouble being the high bidder, however if LG wants to keep a portion of the business or participate in new product development in some way, VinGroup would be a more logical suitor than Google, whose ‘Pixel’ smartphone competes directly with LG, or Facebook, who has little or no experience in the smartphone business. Usually money talks, but partial participation by LG could cast a different tone over such negotiations, if and when they begin, as LG has yet to open an official bidding process.
Back in 2018 VinGroup formed VinSmart (pvt), a subsidiary devoted to the smartphone market and released 4 models by the end of 2018, which ranged in price from $107 to $285, came in only two colors (black and white) and were relatively simple devices with one or two cameras, but were based on Qualcomm (QCOM) chipsets and tested by Qualcomm for quality. Since the company had a vast retail empire they were able to offer both an unusually long warranty (18 months) with over 500 customer centers across the country and initially offered the phones at what they called a “3 No” price policy, which meant that the product would be sold at cost + selling cost, without depreciation, interest, or any financial costs.
At the onset the company used Chinese ODMs and assembled some of the products but began setting up R&D centers in the US, Korea, Japan, China, Israel, and Singapore to work with local product developers. The company began to develop and produce its own phones this year, releasing the $177 Live 4 model and had expected to launch two more lower-priced models in 1H, but the releases were delayed by COVID-19, however the company’s factory in Hanoi can currently produce 26m smartphones/year with a target, after expansion, of 125m.
VinGroup has recently announced its intention to issue ~$303m of domestic bonds to finance both its automobile and smartphone businesses, and while the bulk of the capital will allegedly go toward the automotive business, VinGroup, or one of its subsidiaries is considered to be a front-runner in the potential purchase of LG Electronics’ (066570.KS) mobile phone business, which has been losing money for years. Vingroup has worked directly with LG as far back as 2012, with the development and production of LG’s Nexus series of smartphones. That said, Google (GOOG), Facebook (FB) and Volkswagen (VOW.GR) have all been mentioned as possible suitors for the LG mobile division.
Given the almost limitless capital available to Google and Facebook, we expect VinGroup will have trouble being the high bidder, however if LG wants to keep a portion of the business or participate in new product development in some way, VinGroup would be a more logical suitor than Google, whose ‘Pixel’ smartphone competes directly with LG, or Facebook, who has little or no experience in the smartphone business. Usually money talks, but partial participation by LG could cast a different tone over such negotiations, if and when they begin, as LG has yet to open an official bidding process.
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