Vietnamese-made chip may stumble over commission scheme

The quality of products as well as state policies will determine the future of the integrated circuits (IC) industry development and sales in Vietnam, experts have said.

Ngo Duc Hoang, MA, director of the Vietnam National University Integrated Circuit Design Research and Education Center (ICDREC), which has successfully created high-quality chips, said he can anticipate major barriers that would obstruct ICDREC’s chips.

Hoang said the saleability of the chips would not only depend on prices and quality, but on “many other factors”. 

Hoang did not clarify what “many other factors” means. However, analysts pointed out that one of the “factors” is the “commission” scheme.

State’s agencies, organizations and state-owned enterprises, which implement public procurement projects, are the largest clients for chip manufacturers. 

Meanwhile, the big buyers prefer buying imports from distribution companies to buying domestically made products, because they can get commissions from the distributors for procurement contracts.

An analyst said that Vietnamese businesses and organizations tend to use popular products instead of newly marketed products. 

They also would rather buy ready-made components to assemble than develop products themselves, because they don’t want to spend money on R&D (research and development) departments.

This is a thorny problem for Hoang and his co-workers, who have entered commercial product development.

ICDREC recently won the bid to provide 3,000 DCM (data concentration modem) to the HCM City Electricity Corporation. 

The equipment would be used to collect data from a distance and then transmit it to the operation centre via GSM/GPRS.

However, Hoang said the bid was just the very beginning of the commercial development period, while scientists still need to find answers to questions about capital and industrial production.

“The electricity corporation has confidence in our product. However, we will think about how to organize the production to fulfil the large orders of hundreds of thousands of products,” Hoang said.

In other words, the client believes that the chip invented by ICDREC has high quality, but is not sure if such a centre can organize large-scale production.

Analysts noted that ICDREC’s chips have a vast domestic market. 

Power companies need 20 million electronic meters. In general, they need to replace single-phase meters once every five years and replace three-phase meters once every three years. 

Besides, they would also need smart meters. In HCM City alone, the city power corporation has to spend US$2 billion on smart meters.

However, the analysts say, ICDREC’s scientists still need state support to fully exploit the vast market.

The Korean Government supports its businesses by setting up regulations encouraging domestic businesses to use Korean products. Will Vietnam follow in that way?