1

COVID-19 and [INDUSTRY]COVID-19 Impact Assessment

Analysis of the Potential Impacts of COVID-19 on Vietnamese Economy

The objective of this paper is to explore the potential impacts of the

COVID-19 outbreak on the Vietnamese economy. Such an exercise

is accompanied by a considerable level of uncertainty. Specifically,

in the case of COVID-19, projections have been reviewed and

readjusted every week since the start of the outbreak.

Additionally, Vietnam’s economy is highly dependent upon other

economies. As such, the scenarios and projections relating to the

effects on the Vietnamese economy are also strongly correlated with

the effects on other countries resulting from the COVID-19 outbreak.

This paper covers the following parts:

Part I

Vietnam’s Current

Economic

Prospects

Part II

Sluggish Economic

Prospects to Come

in Vietnam’s Key

Export Markets

Part III

Selected Sectors

Snapshot:

Textiles/Garments

and Consumer

Electronics

Manufacturing

2

Based on the projections that have been readjusted throughout April 2020, Vietnam’s short term

economic outlook remains positive, with the country still being expected to be one of the few countries

that will continue to grow in 2020, while the rest of the world is being projected to enter into recession.

However, there are considerable variations in the current projections, highlighting the considerable

levels of uncertainty that remain in May 2020.

So far, the official Q1 results published by the General Statistics Office of Vietnam appear to confirm

that economic slowdown resulting from the COVID-19 outbreak. Although tourism and hospitality

have been the most-heavily affected sectors, Vietnam’s exports have nonetheless been able to

marginally exceed their Q1 2019 levels, growing slightly on a year-over-year basis.

The impacts of the COVID-19 outbreak so far have varied, both by sector and by province. In

particular, Central Vietnam appears to have sustained the most dramatic effects, with Da Nang

announcing that its disbursed Foreign Direct Investment (FDI) – especially for the tourism sector -

has fallen by 80% in comparison with last year’s figures. Overall, however, Vietnam has still

managed to register GDP growth of +3.4% in Q1 2020, as compared to Q1 2019.

0.0%

Vietnam United States Japan South Korea China

2.0%

-8.0%Thailand

4.0%

6.0%

-6.0%

-4.0%

-2.0%

8.0%

3.2%

6.7%

2.3%

-1.5%

7.0%

4.8%

3.3%

2.7% 1.9%0.7%

0.4%

-5.9%

1.3%

0.5%

-6.7%

-5.2%

2.0%2.4%

-1.2%

6.1%

6.0%

2.3%

1.2%

2.4%

-4.8%

Revision of Gross Domestic Product (GDP) growth forecast of selected countries due to the

outbreak of COVID-19Unit: percentage

Source: ADB, IMF, FitchRatings, PwC Research and Analysis

2019

2020f before COVID-19 2020f after COVID-19 (IMF – 06 April 2020)

2020f after COVID-19 (ADB – 03 April 2020) 2020f after COVID-19

(Fitch – 08 April 2020)

Part I: Vietnam’s Current Economic Prospects

3

Following its accession to the WTO in January 2007, a notable trait of the Vietnamese economy over

the past decade has been its substantial and increasing interconnection with other economies, via

trade and investment. Two of the major drivers that have been essential for the previous growth and

economic development are: (1) the level of FDI in the country, and (2) the country’s capacity for

export. Indeed, a large chunk of the foreign direct investment has been directed towards the export-

heavy sectors. For instance, the manufacturing sector, which is largely aimed at exports, accounted

for c.57% of the total registered FDI in 2019.

Domestic retail sales Unit: USDmn

Domestic hospitality and food

servicesUnit: USDmn

Registered foreign capital to VietnamUnit: USDmn

Source: GSO, PwC Research and Analysis

Real GDP (base year 2010)Unit: USDmn

Tourism spendingUnit: USDmn

Export values by ownershipUnit: USDmn

Correlation between total exports and nominal GDP USD billion, 2010-2019

2013 2014

170%

2015

80%

15%2016 2017 2018 2019

65%

85%

90%

95%

100%

175%

84%66%

77% 63%

101%170%

63%81%

86%

96%

100%

Export as % of GDP%, 2013-2019

1500 250100500

200 300

50

100

150

200

250

300

Total exports (USD bn)

Nominal GDP

(USD bn)

R-square = 97.2%

Singapore

Malaysia

Thailand

Cambodia

China

Indonesia

Vietnam

Source: GSO, Custom, PwC Research and Analysis

35,03239,283 42,127

Q1 2019Q1 2018 Q1 2020

+12.1% +7.2%

5,555 5,9935,394

Q1 2018 Q1 2019 Q1 2020

+7.9% -10.0%

5,802

10,805

8,552

Q1 2019Q1 2018 Q1 2020

+86.2%-20.9%

27,682 29,228 30,223

Q1 2020Q1 2018 Q1 2019

+5.6% +3.4%

415462

332

Q1 2018 Q1 2019 Q1 2020

-28.1%

40,542 41,636 40,429

15,640 17,157 18,650Domestic

Q1 2018 Q1 2019

FDI

Q1 2020

56,182 58,794 59,079

+4.6% +0.5%’18-19 ’19-20

9.7%

2.7%

8.7%

-2.9%

+11.4%

19%

17%

2019

4

More than 50% of Vietnam’s exports are destined for the three markets: the U.S

(23%), China (16%) and the European Union and United Kingdom (14%). In addition,

the U.S and Europe have together accounted for more than USD 75bn in trade

surpluses. These trade surpluses with both Europe and the U.S. have been critical to

the continuous growth of the country.

Annual aggregate trade balanceUSD billion, 2012 – 2019

CAGR

12-19

Trade balance by top partnersUSD billion, 2019

114

115 132

213

1 0

132

20182012 20152013

11

150

148

72

2014

162

166

4

177

175

264

237

2

2016

215

2

2017

243

253

2019

61

South KoreaUS

14

47

41

15

27

EU

20

20

1

Japan

2734

32

25 20

ASEAN

7

47

75

41

China

Trade Surplus Trade Deficit

Source: GSO, PwC Research and Analysis

For Vietnam, a large proportion of the trade surplus with the U.S and Europe has

been generated by: 1) consumer electronics; 2) textiles, garments, and shoes; and

3) to a lesser extent, agriculture.

>50%of Vietnam’s

exports are

sent to the U.S,

China and the

European Union

and United

Kingdom

41

13%

12%

5

In 2019, consumer electronics as a whole accounted for 25% and 41% of the total exports to (1) the

U.S. and (2) the European Union and UK, respectively (see below). Textiles/Garments (including

footwear) accounted for 35% and 22%, respectively.

Vietnam’s top export products and destinations (2015-2019)Unit: USD million

CAGR

2015-2019

10%

23%4%

4%

11%

2018

10%

9%

6%

16%

EU +8.0%15%

2015

21%

8%3%

15%

6%

176,581

16%

8%

16%

12%

22%

2019

8%

17%

2016

21%

Others +9.6%

2017

162,017

10%

19%

7%10%

China +24.7%

16%

20%

3%

7%

8%ASEAN +8.4%

20%

South Korea +21.9%

20%

3%

14%

7%

23%11%

HongKong +0.7%

Japan +9.6%

US +16.4%

264,189

21%

215,119

243,697+13.0%

286,367

6%

8%

2015

28%

5%7%

14%

68%

8%

6%

7%

7%

13%

30%

2016

32%

68%

7%

6%

6%

7%

12%

33%

68%

33%

7%

68%

13%

2018

7%

7%

12%

2019

351,494

2017

66%

207,791

229,853

322,479+14.0%

Source: Vietnam Customs, PwC Research and Analysis

(*) Agriculture includes cashew nut, pepper, fruits and vegetables, rice, coffee, tea, maize, wheats, and soya beans

10%

11%

21%

23%

66%

CAGR

2015-2019

Others +14.0%

Agricultures* +4.0%

Machinery, equipment +22.4%

Footwear +11.1%

Textiles / Garment +9.6%

Consumer electronics +17.5%

6

The key to Vietnam’s continuous economic growth has been the country’s capacity to consistently

grow its exports. This has been driven by: (1) the growth in the overall imports from Europe and the

U.S.; and (2) the substantial gains in market share in Europe and in the U.S. over the previous

decade. In these markets, Vietnam’s main competitors have been China and, to a lesser extent,

other export-heavy countries in South East Asia, such as Thailand, Malaysia, and Taiwan.

Vietnam’s export value by destination (2019)Unit: USD million

Source: Vietnam Customs, PwC Research and Analysis

European Union United States of America

Growth in Vietnam’s exports to the EU (phones,

consumer electronics and textile / garments)Unit: USDmn

Growth in Vietnam’s exports to the US (phones,

consumer electronics, and textiles / garments) Unit: USDmn

4%

3%

EU

11%

Export destination

Others35%

8%

10%

7,156

8%

1%

61%

7%

6%

2%41%

ASEAN

10%

12%

5%

41%20%

6%

9%

Japan

6%

30%

17%

25%

8%

China

3%

56%

17%4%

4%

2%

21%

10%

2%

Machinery,

equipment

43%

10%

USA

24%

3%

24%

4%

30%

59%

Hong

Kong

Agriculture

Footwear

Textiles/

Garments

Consumer

electronics

61,347 41,414 35,752 25,209 20,413 19,720

Korea

Export products

2

1

15.9

22.8

4.3

2.5

2013 Gain in

market share

Growth in

EU imports

2019

13.2

33.7

18.9

2013

1.6

Growth in

U.S. imports

2019Gain in

market share

7

The Q1 results so far have displayed mixed results. Vietnam seems to have been able to maintain its

overall export levels to its key export destinations. Except for textiles, Vietnam’s exports have in fact

increased in Q1 2020, as compared to Q1 2019.

These Q1 results reveal the rather limited impacts of the COVID-19 outbreak on these key sectors.

However, we can expect to see more drastic impacts in Q2 and Q3, as these Q1 figures do not yet

reflect any downturns in the general economy or in consumption in the U.S. and in Europe. That said,

Q1 includes the China’s lower exports, as a result of the business restrictions that were implemented

until the end of March following the COVID-19 outbreak.

EU computer and parts imports by partner (USDbn)

2013 2019

China 35.5 67.4% China 36.7 67.9%

United States 2.9 5.5% United Kingdom 3.3 6.1%

Thailand 2.4 4.6% United States 3.1 5.7%

United Kingdom 2.4 4.5% Thailand 2.4 4.4%

Vietnam 2.0 3.9% Taiwan 1.7 3.2%

Taiwan 1.0 1.9% Vietnam 1.1 2.1%

South Korea 0.7 1.3% South Korea 1.0 1.9%

Total 52.7 100.0% Total 54.0 100.0%

EU phone & transmission imports by partner (USDbn)

2013 2019

China 30.1 49.5% China 47.1 87.2%

Vietnam 9.1 15.0% Vietnam 11.8 21.8%

United Kingdom 3.6 5.9% United Kingdom 4.8 8.9%

South Korea 2.9 4.7% Malaysia 2.4 4.4%

Malaysia 2.5 4.1% Hong Kong 1.5 2.8%

Taiwan 2.3 3.7% Taiwan 1.2 2.2%

Hong Kong 1.8 3.0% Thailand 1.2 2.2%

Total 60.7 100.0% Total 78.0 100.0%

EU garment imports by partner (USDbn)

2013 2019

China 32.9 37.9% China 35.8 44.9%

Bangladesh 11.3 13.0% Bangladesh 20.2 17.1%

Turkey 11.1 12.8% Turkey 13.0 16.3%

India 5.2 6.0% United Kingdom 6.9 8.1%

United Kingdom 4.7 5.4% India 6.5 5.5%

Tunisia 2.8 3.3% Pakistan 5.0 6.3%

Morocco 2.7 3.1% Vietnam 4.4 5.5%

Vietnam (ranked 9) 2.2 2.5%

Total 86.8 100.0% Total 118.6 100.0%

EU footwear imports by partner (USDbn)

2013 2019

China 8.5 44.9% China 10.4 36.7%

Vietnam 2.6 13.8% Vietnam 5.4 19.0%

Indonesia 1.4 7.4% United Kingdom 2.4 8.4%

United Kingdom 1.3 6.7% Indonesia 1.9 6.6%

India 1.2 6.4% India 1.5 5.2%

Tunisia 0.5 2.8% Cambodia 0.9 3.1%

Albania 0.3 1.6% Tunisia 0.6 2.2%

Total 19.0 100.0% Total 28.4 100.0%

US computer and part imports by partner (USDbn)

2013 2019

China 54.0 65.8% China 46.1 50.5%

Mexico 13.7 16.7% Mexico 27.3 29.8%

Thailand 4.4 5.4% Taiwan 6.1 6.6%

Taiwan 1.5 1.9% Thailand 4.5 4.9%

Vietnam 1.2 1.5% Vietnam 1.2 1.3%

Malaysia 1.2 1.5% Germany 0.9 0.9%

Singapore 1.1 1.3% Malaysia 0.8 0.9%

Total 82.0 100.0% Total 91.4 100.0%

US phone & transmission imports by partner (USDbn)

2013 2019

China 53.2 61.6% China 64.0 62.5%

Mexico 9.1 10.6% Vietnam 11.9 11.6%

South Korea 7.1 8.3% Mexico 8.0 7.8%

Malaysia 4.6 5.3% Taiwan 3.5 3.5%

Taiwan 2.7 3.2% South Korea 3.3 3.2%

Thailand 2.5 2.9% Malaysia 2.8 2.7%

Canada 1.0 1.2% Thailand 2.4 2.3%

Vietnam (ranked 9) 0.8 1.0%

Total 86.4 100.0% Total 102.3 100.0%

US garment imports by partner (USDbn)

2013 2019

China 37.3 39.8% China 34.3 34.1%

Vietnam 8.2 8.7% Vietnam 13.6 13.5%

India 5.4 5.7% India 6.7 6.6%

Indonesia 5.0 5.4% Bangladesh 5.9 5.9%

Bangladesh 5.0 5.4% Indonesia 4.5 4.4%

Mexico 4.6 4.9% Mexico 4.3 4.3%

Pakistan 2.8 3.0% Honduras 2.9 2.9%

Total 93.7 100.0% Total 100.8 100.0%

US footwear imports by partner (USDbn)

2013 2019

China 17.0 68.5% China 13.4 49.6%

Vietnam 2.9 11.7% Vietnam 7.0 25.8%

Italy 1.3 5.2% Indonesia 1.7 6.1%

Indonesia 1.2 4.8% Italy 1.6 5.8%

Mexico 0.5 2.0% Cambodia 0.5 1.8%

India 0.3 1.2% India 0.5 1.7%

Dominican Rep. 0.3 1.2% Mexico 0.4 1.6%

Total 24.8 100.0% Total 27.1 100.0%

Source: USITC, Eurostat, PwC Research and Analysis

8

Vietnam’s export value of phones and partsUnit: USD million

Vietnam’s export value of computers, electronics and parts Unit: USD million

472

FebJan Mar

985

214425

215

924

1,438 1,249

811

-10%

+56% -35%

610894

Feb

218

Jan

202

Mar

810559

32491

227

+156% +573%+301%

MarJan

207

Feb

220 150306

591 612

215381

754

+93% +196%+98%

FebJan Mar

475

561

691 680

442

730600

735

1,175

+21%+54%

+60%

US China

2018 2019 2020

MarJan Feb

741

1,278

8231,109

492

853852

822 1,246

-34%+4%

-13%

FebJan Mar

392

362

407

315 263348

273318

410

-23%+17% +4%

EU

US China EU

2018 2019 2020

Vietnam’s export value of textiles and garmentsUnit: USD million

1,031

Jan Feb Mar

1,0551,186

1,585

1,219

767552

1,074 1,188

-23%

+87%-11%

FebJan Mar

105108

124

89 68 9878

109

96

-28%+34%

-12%

Jan Feb Mar

269

330

260 163

113

197 209

224

189

-21%+75%

-16%

US China EU

2018 2019 2020

Vietnam’s export value of agricultural productsUnit: USD million

Jan Feb Mar

169147

99172

92

194

73121

146

-33%+67%

+18%

Jan Feb Mar

403

532

274323 235

226

474406

425

-32%-4%

+5%

US China

Jan Feb Mar

190218212

152 153

119206

180

213

-28%+60%

+19%

EU

2018 2019 2020

Source: Vietnam Customs, PwC Research and Analysis

9

In the upcoming period, one key driver of the Vietnamese economy will be the effects of the COVID-19

outbreak on the consumption indicators of significant export destinations – specifically, the U.S. and

Europe. The most recent projections from the WTO, dated April 2020, forecasted an unprecedented

decline in global trade, with U.S. and Europe imports being expected to be significantly impacted.

180

60

40

160

120

80

100

1402011

2008

2005

2015

2009

2000

2001

2002

2003

2004

2006

2007

2010

2012

2013

2014

2016

2017

2018

2019

2020

2021

2022

Merchandise Trade

Trend 1990 - 2008

Pessimistic ScenarioTrend 2011 - 2018

Optimistic Scenario

World merchandise trade volume, 2000-2022

Index, 2015=100

Ratio of world merchandise trade growth to world GDP growth, 1990-2020

% change and ratio

0%

-10%

1

20%

2-20%

-40%

-30%

4

10%

7

3

6

-1

5

0

2017

2003

Growth

1996

2016

1991

2008

2001

1997

Ratio

1990

1992

1993

1994

2015

2004

1995

2014

1998

1999

2000

2002

2005

2006

2007

2009

2010

2011

2012

2013

2018

2019

2020

World GDP growthRatio of trade growth to GDP growth World trade volume growth

Source: WTO, PwC Research and Analysis

Part II. Sluggish Economic Prospects to Come

in Vietnam’s Key Export Markets

10

The most recent indicators also raise the possibility of substantial difficulties in Q2 and Q3 of this

year. For example, U.S. unemployment has already surpassed the 2008 figures, as a result of the

COVID-19 outbreak - and, with U.S. unemployment continuing to increase each week, it is now

projected to exceed 20% by end of 2020.

The partial or total lockdown in these countries will strongly affect consumption spending. In Europe,

a number of government policies have been implemented in order to support employment in many

key markets, mitigating the risk of dramatic increases in unemployment, for the moment. Two

examples of such policies are the “kurzarbeit” in Germany and the “chômage partiel” in France, which

enable workers to file for public unemployment and / or social subsidies on a temporary basis, via the

public scheme.

Overall, the most recent industry reports project an unprecedented decline in the consumption of: (1)

footwear and apparel; and (2) phones / other related consumer electronics in 2020. Most of the

scenarios for these two industries currently appear to project a steady decline in Q2 and Q3 of 2020,

with a progressive rebound to pre-COVID-19 crisis demand levels by end of 2020 and into Q1 2021.

Unit: Annual % changeHistorical

WTO - Optimistic

Scenario

WTO - Pessimistic

Scenario

2018 2019 2020F 2021F 2020F 2021F

World Imports 2.9 -0.1 -12.9 21.3 -31.9 24.0

North America 5.2 -0.4 -14.5 27.3 -22.8 29.5

Europe 1.5 0.5 -10.3 19.9 -28.9 24.5

Real GDP - World 2.9 2.3 -2.5 7.4 -8.8 5.9

North America 2.8 2.2 -3.3 7.2 -9.0 5.1

Europe 2.1 1.3 -3.5 6.6 -10.8 5.4

European Union

EU Economic Sentiment Index (avg. 2000-2019 = 100)Unit: points

100

95

105

Jan-20Dec-19Oct-19 Mar-20Nov-19 Feb-20

94.8

100.4 100.9 101.0102.5 103.0 140

100

120

Jan-20Nov-19 Mar-20Dec-19Oct-19 Feb-20

128.2126.1132.6

126.8130.4

120.0

0%

5%

10%

Oct-19 Nov-19

6.2%

Dec-19 Jan-20 Feb-20

6.3% 6.3% 6.6% 6.5%

0%

10%

20%

3.6% 4.4%

Jan-20Oct-19 Dec-19Nov-19

3.5%

Feb-20

3.5%3.6%

Mar-20

3.5%

13.0%

20.0%

Estimates by end

of March and April

United States of America

EU unemployment rate Unit: %

US unemployment rate Unit: %

Source: Eurostat, European Commission, US Bureau of Labor Statistics, PwC Research and Analysis

US Consumer Sentiment Index (1985 = 100)Unit: points

11

1) For textiles, apparel and footwear, the global textiles consultancy Wazir Advisors projects

consumption declines of -40% and -45% in the U.S. and Europe, respectively. Any return to

normal levels of consumption will of course be highly dependent upon the development of the

lockdown measures and the reopening of stores in 2020. In the scenario that they present,

Wazir Advisors expect a progressive return to pre-COVID-19 consumption levels by the end of

2020.

Expected impact on apparel consumptionUnit: USDbn

+5%

USA EU

Source: Wazir advisors, PwC Research and Analysis

+6%

+4%

+3%403 427 440

240

251263

273

165

690

20182017 2019 2020F

654

713

405-40%

-45%

Expected impact on apparel and textile consumptionUnit: %

40%

5% 5% 5%

25%

50%

5%

10% 10%

75%

90%

FebJan Aug

10%

Mar May

75%

Apr DecJun Jul

100%

Sep Oct Nov

10%

Normal

level

100%100%

100% 100%

Projected Consumption EU (2020)

Projected Consumption US (2020)

Avg. consumption EU: 59%

Avg. consumption US: 63%

12

2) According to specialist market research firm CCS Insight, the 2020 consumption of phones is

projected to drop by 13% (with -10.6% for smartphones). Indeed, this year is expected to be the

lowest year for sales since 2010. In the scenario that they present, the recovery in the

consumption of phones and consumer electronics, is expected to attain pre-COVID-19 levels by

the end of 2020 as well.

Global number of Mobile phone shipments forecastUnit: million shipments

1,810.0

1,570.01,760.0

1,990.0

2022F

13.1%-2.2%

2019 2021F

-13.3%

2020F

12.1%Growth rate vs.

previous year

Global number of Smartphone shipments forecastUnit: million shipments

1,403.6 1,437.01,339.8

1,424.2

1,260.0

2021F

-2.3%2.4%1.5%

2020F 2021F 2020F2020F

6.3%

-10.6%

Forecast

IDC

Nov 2019

Forecast IDC

Feb 2020

CSS Insight

Mar 2020

CSS Insight Mar 2020

Growth rate vs.

previous year

Source: IDC, CSS Insight, PwC Research and Analysis

Source: IDC, CSS Insight, PwC Research and Analysis

13

How will these few months of a sharp decline in consumption level in both the U.S. and Europe likely

to affect Vietnam? Although Q1 2020 revealed only a slight and limited impact on the Vietnamese

economy, the worst may be ahead in Q2 and Q3, since: (1) consumer demand in key export markets

is expected to face an unprecedented decline; and (2) there will be stiffer competition from China,

with its business returning progressively to normal over Q2. Both of these factors pose considerable

threats to Vietnam’s trade balance and its surplus for 2020, and on the path to a smooth return to the

pre-COVID 19 situation.

CountryFirst

Lockdown

Expected end

of lockdown

Conditions to

ease restrictionsNotes (as of 25/04)

March 19th *Late-April &

Onwards*

• Decreases in the rates of

increase for cases,

deaths

• Confirmed capacity of

hospitals & frontline

workers

• US States have already begun to ease their

restrictions – a ‘partial re-opening’

• Early June has been targeted as the most

likely time for the majority of states to more

fully ‘re-open’

21st Feb

(First)

March 9th

(National)

May 3rd• Sustained declines in

rates of increase for

cases, deaths

• The opening of factories and large gatherings

are projected to be delayed into the summer

March 22nd Late April

• Maintenance of hygiene,

social distancing

measures

• Sustained declines in rate

of increase for cases,

deaths

• Mass gatherings are banned until at least

August 31st

March 17th May 11th

• Sustained declines in rate

of increases for cases,

deaths

• Needs to have full testing

capacity

• After May 11th, the ‘progressive’ lifting of

confinement is expected

• Full restrictions are projected to extend until at

least July

• Social distancing will still be enforced and

there will be some restrictions for the high-risk

population

March 23rd May 7th

• Sufficient protection for

NHS

• Sustained, consistent falls

in deaths, infection rates

• Sufficient testing capacity

• The UK has communicated the need to

assess whether the situation is optimal for

minimizing the risk of a second peak before

fully re-opening

Overall, given the unprecedented nature of the COVID-19 crisis, any attempts at projecting the actual

impacts on American and European consumption levels are highly uncertain. In the case that COVID-

19 is managed well and relatively controlled in Europe and the U.S., the most notable impact is likely

to be a dip in consumption lasting for several months, before progressively returning to pre-COVID 19

levels at the end of 2020 and into Q1 2021.

USA

Italy

Germany

France

UK

Source: Local press, PwC Analysis

14

At the sector level, the production of (1) textiles / garments and (2) phones and consumer electronics

reveal quite different market structures in Vietnam.

In 2019, there were c.11,000 and c.1,800 registered enterprises in Vietnam in the sectors of (1) textile

/ garment and (2) consumer electronics manufacturing, respectively. These companies employed c.3

million workers in 2019. Taking into account the other manufacturing enterprises that rely directly

upon these two sectors (e.g. the subcontractors of and the suppliers to the textile / garment and

consumer electronics manufacturers), the total number of employees who work in these sectors

would be closer to 10 million.

1) The Vietnamese textiles industry remains largely driven by small and medium local enterprises,

working as contracted manufacturers to foreign clients in Europe, the U.S., and China. These

small and medium enterprises (i.e. enterprise with annual revenues of less than 50m) are

estimated to account for more than 50% of the sector.

Selected sectors: Split by ownership (2018)Unit: USDmn

Selected sectors: Split by enterprise size (2018)Unit: USDmn

39% 61%

99%Electronics

Manufacturing1%

Textiles /

Garments34bn

107bn

16%

1%

27% 35%

92%3%

3%

13%

9%

34bnTextiles /

Garments

Electronics

Manufacturing107bn

Less than USD 5m

Greater than USD 100m

50-100m

10-50m

5-10m

Local

Foreign

Annual revenue

Source: GSO, PwC Research and Analysis

Part III: Selected Sectors Snapshot: Textiles/Garments and

Consumer Electronics Manufacturing

Source: GSO, PwC Research and Analysis

15

No.Top Textiles

Manufacturing Countries

1 China

2 EU (28)

3 India

4 Bangladesh

5 Vietnam

6 Turkey

7 United States

8 Hong Kong

9 Indonesia

10 Cambodia

Branding DesigningMaterial

Sourcing

Cut and

Trim

Distribution/

Retail

CMT

FOB

ODM

OBM

1

2

3

4

Source: PwC Research and Analysis

The sector in Vietnam is largely composed of small “cut, make, and trim” (“CMT”) companies,

which conduct their work at the very final stages of the manufacturing value chain. A few of

these companies have been able to move to the FOB level.

Furthermore, Vietnamese CMT textile companies are labour-intensive, and relatively low-margin

businesses (with a 5 to 10% net profit, on average, as compared to 15 to 20% for FOB textile

companies). A recent survey that was conducted by Dragon Capital in Q1 2020 revealed that

CMT companies have already lost 20 to 30% of their orders for Q1, as compared to Q1 2019.

The impact of the COVID-19 outbreak in Q2 may be of even greater magnitude, given the

prospects for the U.S. and Europe.

For the textiles / garment industry in Vietnam, the COVID-19 crisis may accelerate (i) the

recently observed trend of concentration, and (ii) a shift towards increased value-added activities

by moving to FOB activities.

2) Regarding consumer electronics / phones / computers and parts, the sector is largely driven by

large international companies that have recently been relocated elements of their production to

Vietnam. For such companies, their exposure to the COVID-19 crisis is not likely to be as critical

as for the Vietnamese textiles / garment sector. Even so, such companies can expect to face a

contraction of 10 to 20% in their orders for 2020 (as suggested by the recent market projections

in Part II), as compared to 30 to 40% contraction for textiles firms.

16

One expected key impact of the COVID-19 crisis is the slowdown of foreign direct investment in the

consumer electronics manufacturing sector. Most expansion plans have been suspended or stopped

since the COVID-19 outbreak.

Although the outbreak is likely to result in a delay in investment, rather than threaten the overall

attractiveness of the country in terms of foreign investment, the lower level of FDI that is expected for the

rest of 2020 may place considerable short-term pressure on the Vietnamese economy.

Factory Location Investment overview Description

Samsung

Vietnam

(Korea)

Samsung

Electronics VietnamBac Ninh

- Phase I: USD 670mn (operation in April

2019)

- Phase II: USD 830mn (completed

disbursement in 2013)

- Phase III: USD 1bn

+ 2013-2015: USD 600mn

+ 2016: USD 200mn

+ 2017: USD 200mn

The Samsung Electronics Vietnam complex (Bac Ninh),

produces cell phones, tablets, smart watch, computer

display and other electronics products

Samsung

Electronics Vietnam

Thai Nguyen

(“SEVT”)

Thai Nguyen

- Phase I: USD 2bn (operation in March

2014)

+ 2013-2016: USD 1.6bn

+ 2017: USD 200mn

+ 2018: USD 200mn

- Phase II: USD 3bn

+ 2015-2017: USD 2.5bn

+ 2018: USD 300mn

+ 2019: USD 200mn

The SEVT complex, produces cell phones, tablets, smart

watches, and other electronics products

Samsung CE

Complex (“SEHC”)

Ho Chi Minh

CityUSD 2.0bn (operation since June 2016)

The SEHC produces TVs and electrical household

appliances such as AC units, washing machines, fridges,

vacuum cleaners, etc.

Nidec

Group

(Japan)

Nidec Shimpo

VietnamHanoi - 2018: registered capital of USD 200mn

Developing, manufacturing and trading small-sized gear

reducers with high accuracy

Nidec Techno Motor

VietnamHanoi - 2018: registered capital of USD 200mn

Developing, manufacturing and selling of DC brushless

motor

Upcoming Projects Hanoi3 other projects in the future, increasing the

total investment in Hanoi to USD 1bn

Motors and industrial products supporting manufacturing

of high-tech engines

LG

Electronics

(Korea)

LG Electronics Hai

PhongHai Phong

- 2013: registered capital of USD 1.5mn

(operation since March 2015)

Established complexes with 3 factories in Hai Phong in

order to produce and process OLED screens,

smartphones, TV and other consumer electronic products

LG Display Hai

PhongHai Phong

- 2016: registered capital of USD 1.5bn

(operation since June 2016)

- 2018: increased capital by USD 500mn

- 2019: increased capital by USD 410mn

Produces and processes OLED displays, including TV

displays and plastic displays for mobile devices;

LG Innotek Hai

PhongHai Phong

- 2016: registered capital of USD 550mn

(operation since late 2017)

- 2018: increased capital by USD 501mn

Manufactures electronic components and micro camera

modules;

Techtronic

Industries

(TTI)

(Hong

Kong)

Techtronic Tool

VietnamHCMC

- 2019: registered capital of USD 650mn.

The project will progress from 2021 to

2028

Produces of electrical equipment, electrical accessories,

outdoor electrical appliances, lighting equipment,

appliances; measuring tools, pumps and other similar

tools, accessories and devices

Goertek

(Hong

Kong)

Goertek Vina Bac Ninh - 2019: registered capital of USD 260mn

Produces of headsets (wired headsets, Bluetooth

headsets, etc.); conference phone systems; VR virtual

reality glasses; speakers, speaker boards, microphones,

receivers, etc.

Noticeable impacts of the COVID-19 outbreak on the FDI sector and investments

Industry Factory Location Actions Details

Samsung Vietnam

(Korea)Electronics

Samsung Display

Bac NinhBac Ninh

Quarantined and

isolated

Authorities ordered people working at a unit of Samsung Display

in Bac Ninh province to be quarantined and isolated the Samsung

factory after a worker tested positive for COVID-19. Samsung

however, has stated that its production lines remain unaffected

Poongsan System

(Korea)Electronics

Poongsan

System Hai

Duong

Hai DuongPostponing

investmentn/a

Google

(U.S.)Electronics n/a n/a

Reconsidering

investment timingn/a

Microsoft

(U.S.)Electronics n/a n/a

Reconsidering

investment timingn/a

Apple

(U.S.)Electronics n/a n/a

Reconsidering

investment timingn/a

Shan Hong

VietnamTextiles

Shan Hong

Factory Dong NaiDong Nai

Postponing

investmentPostponing investment from 9/2020 to 11/2020

17

This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

©2020 PwC (Vietnam) Limited. All rights reserved. PwC refers to the Vietnam member firm, and may sometimes refer to the PwC network.

Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details.

At PwC Vietnam, our purpose is to build trust in society and solve important problems. We’re a member of the PwC network of f irms in 157 countries with

over 276,000 people who are committed to delivering quality in assurance, advisory, tax and legal services. Find out more and tell us what matters to you

by visiting us at www.pwc.com/vn.

Contact us

Nguyen Luong HienPartner

Deals Strategy

nguyen.luong.hien@pwc.com

Johnathan OoiPartner

Valuation, Capital Projects

& Infrastructure

johnathan.sl.ooi@pwc.com

Ong Tiong HooiPartner

Transaction Services

tiong.hooi.ong@pwc.com

Overall, as we look ahead to Q2 and rest of 2020, we are likely to see the first signs of a considerable

slowdown in the Vietnamese economy. On April 21st, the International Labour Organisation (“ILO”)

provided a re-adjusted – and less favorable outlook for Q2 2020. The ILO is now projecting that 20 to

40% of Vietnamese workers in textiles and electronics manufacturing becoming unemployed or

suffering substantial salary cut as a result of the downturn, depending heavily on the pace of recovery

in key export markets.

In a scenario where the orders from Europe and the U.S. would recover by September 2020, the key

questions would be (1) the capacity of local entities to sustain several months of low business

activities, resulting in low income, and (2) their ability to quickly return to pre-COVID 19 production

levels, following several months of, effectively, complete shutdown. Both of the answers are currently

unknowns for Vietnam at the moment, as companies in both textiles and consumer electronics have

historically been more accustomed to dealing with issues resulting from overdemand than from

excess capacity.

Thank you.