Apple's sales boom in communist Vietnam

HANOI Thu Apr 24, 2014 10:05pm IST

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HANOI (Reuters) - Communist Vietnam is suddenly Apple Inc's (AAPL.O) hottest market after sales there tripled in its fiscal first half, a growth rate five times faster than in India where it is spending heavily in a battle for market share.

Vietnam has barely received a mention from Apple executives in their regular briefings for financial analysts. But in a quarterly conference call on Wednesday, they were talking up the potential of the country.

Quarterly iPhone sales more than doubled and the strong growth appears likely to continue given Vietnam's predominantly young, tech-savvy population, rapid growth in internet and mobile phone use and a projected doubling of the middle class by 2020.

Vietnamese tech firms are fast cropping up, churning out apps such as Flappy Bird, which rose from obscurity to become one of the world's most downloaded mobile games. [ID:nL3N0LF1DG]

Young Vietnamese thronging stores to buy iPhones worth up to half of their country's 2012 gross per-capita income say it's worth it.

"This cost more than two months worth of my salary," said officer worker Pham My Linh, 23, moments after agreeing a payment plan for an iPhone 5. "But I need it, to feel more confident when hanging out with friends and colleagues."

The surge in demand comes against a backdrop of sluggish economic growth exacerbated by high levels of bad loans and business closures.

The economy grew 5.4 percent last year, a rate economists see as underwhelming given Vietnam's fast population growth and its retail and manufacturing potential.

But Vietnamese smartphone sellers say a hunger for higher social status is driving Apple's sales, helped by price cuts and payment plans that make it easier to digest handset prices that exceed the monthly income of most urbanites.

TRENDIER SMARTPHONES

The growing thirst for slick technology is not just benefiting Apple, but most firms offering tablets and smartphones, among them HTC (2498.TW) and Samsung (005930.KS). Slower growth for standard mobile phones shows local appetite for upgrades to trendier handsets, industry experts say.

"I've seen no signs of an economic recession in this shop," said the manager of a Hanoi branch of FPT FPT.HM, Vietnam's biggest listed tech company. "People buy $1,000 items with ease and a family buying three iPads isn't uncommon."

According to data released in January by market research firm GfK (GFKG.DE), smartphones accounted for 77 percent of mobile sales in Vietnam last year and the number of units sold grew nearly 135 percent from a year earlier. Tablet sales soared 250 percent in 2013 as prices fell by close to 27 percent.

Many companies are looking closely at Vietnam, where 15 million people live in two main cities, only 30 million use the internet among a 90 million population and two thirds are under 30 years of age.

Apple isn't the only beneficiary of its own brand appeal.

Fake iPhones with a near-flawless appearance are on sale for just 2 million dong ($95).

"There are a lot of people out there who can't afford an iPhone but still want to look rich, which is why shops like mine can do well," said shop owner Nguyen Duc Hai, 33.

"Why pay 10 times more for a real iPhone just to build a luxury image and show off?"

($1 = 21,085 dong)

(Writing by Martin Petty; editing by Tom Pfeiffer)

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