Apple Inc. (NASDAQ:AAPL) expressed considerable interest in the Vietnamese market in its conference call to investors this Wednesday, highlighting an unexpected growth opportunity for the American electronics firm. A technically communist country which nevertheless now allows a form of private enterprise and Buddhist religious practice, Vietnam has already appeared in the news in association with the Cupertino firm thanks to the Flappy Bird game. Apple went so far as to list “China, India, and Vietnam” as its three most important Asian markets.
According to Reuters, growth of Apple sales is 500% higher in Vietnam than in India, though there are important differences in scale. India, after all, is home to over 1 billion people, while Vietnam has only 90 million. There is also an economic difference, since India is a relatively democratic nation with a dynamic middle class, while Vietnam remains a principally agrarian dictatorship, even if its government has mellowed greatly over the years.
Around 15 million Vietnamese live in urban areas and thus have potential access to consumer electronics, communications networks, the Internet, and jobs paying enough to enable purchase of an iPhone or iPad. However, the middle class is experiencing explosive growth, and is expected to double by the start of the 21st century’s third decade. This will lead to an increased flow of people into the cities in search of a better life, plus eventual penetration of greater affluence and technological access into the countryside.
An iPhone 5C represents a substantial investment for most Vietnamese citizens, representing up to 40% of their average annual salary. However, the iPhone is craved not just as a communications tool, but as a status symbol. Projecting an air of sophistication and increasing the owner’s confidence could even, theoretically, lead to positive economic outcomes for iPhone purchasers, giving them both the cache and drive to push into better employment.
Pirated imitations of the iPhone will present something of a drain on potential purchases, since a nearly identical-looking knockoff sells for $100 or less at electronics shops in the Southeast Asian country. However, most of the people buying these phones are probably too poor to buy an iPhone in any case, so the purchases are likely not lost sales for Apple (AAPL). Furthermore, many of these people probably aspire to own a real iPhone and will work towards that goal, providing a potential cash windfall in the future.
Vietnam, the homeland of Ho Chi Minh and Flappy Bird, appears to be an unlikely target market for an international electronics giant such as Apple Inc. (AAPL) to pursue. However, it is through spotting opportunities and rapidly seizing them that firms achieve a position of dominance, and Apple is demonstrating that it is still on top of its global marketing game.
