The Growth of IT Industry in Vietnam

Vietnam’s IT industry is developing quickly, becoming a key hub for global tech entrepreneurs and local startups. Improvements in communications infrastructure, software, and education technology have positioned Vietnam as a potential major player in the global IT market.

Digital technology companies in Vietnam lead in development, innovation, and research, driving the country’s digital transformation. These advancements position Vietnam to impact the global digital technology arena significantly. In this article, we will explore the current state of the IT industry in Vietnam, a prime destination for IT talent.

Vietnam’s Digital Transformation and Economic Growth

ASEAN countries see digital transformation and digital-based economic development as effective ways to advance their cooperation agenda. Last year, Vietnam, the ASEAN chair, was committed to fully digitalizing the ASEAN nations.

The Australian Trade Commission predicts that Vietnam’s ICT industry will grow by about 8% annually from 2022 to 2026. With the ongoing growth of the digital economy, Vietnam’s GDP could increase by an additional US$1 trillion by 2025. Vietnam is becoming a key production hub for IT hardware and services, including software development outsourcing, which is fueling the rapid growth of the ICT sector. Success in e-commerce also helps Vietnam achieve its goals and develop its digital economy quickly.

According to the Vietnam Investment Review Central Institute for Economic Management, Vietnam’s GDP could rise by US$28.5 billion to US$62.1 billion by 2030, marking a 7-16% increase.

Investment Opportunities in Vietnam IT Industry

Vietnam has quickly become a tech hub in Southeast Asia, rapidly growing its digital economy. Several factors contribute to this success, including a large, young population, high smartphone usage, and a tech-savvy workforce. Government support has also played a crucial role, with initiatives to foster innovation, such as tech hubs and startup incubators. Additionally, Vietnam’s location makes it an attractive destination for foreign tech companies aiming to enter the Southeast Asian market.

A Young and Tech-Savvy Population

The digital generation, born between 1992 and 2002, constitutes 21% of Vietnam’s population. The age distribution is as follows:

• 53% are over 29 years old
• 9% are between 25-29 years old
• 7% are between 20-24 years old
• 5% are between 16-19 years old

In 2022, Vietnam had 72.1 million Internet users, placing it 13th in the world.

The Ministry of Education and Training oversees IT education in Vietnam. Recently, the government has given higher education institutions more flexibility to encourage innovation. For example, removing individual entrance exams for each institution has led to higher admission rates.

Vietnam’s IT talent pool is growing both in numbers and in expertise. The country produces around 80,000 IT graduates each year, with many specializing in fields like computer science and information technology. According to Adamo Software, approximately 30% of developers have over 5 years of experience, while 52.5% have less than 3 years of experience.

Supports from Government

Vietnam has implemented a plan to drive national digital transformation. The plan aims to enhance digital government, society, and economy, contributing up to 30% of the country’s GDP.

The Vietnam National Innovation Center (NIC) is focused on supporting the startup ecosystem, fostering innovation, and advancing growth through scientific and technological progress.

The government has made innovation a key goal to boost economic growth, with the Ministry of Planning and Investment spearheading this effort. NIC has identified the following critical areas for development:

• Establishing a policy framework to encourage innovation
• Developing human resources to support digital transformation and innovation
• Investing in innovative startups
• Learning from Japanese experts in the comprehensive innovation process

Regarding Corporate Income Tax (CIT) incentives, IT companies in Vietnam benefit from a CIT exemption for the first four years, followed by a 50% reduction of the 10% rate for the next nine years. After that, companies pay a 10% CIT for two more years. The standard CIT rate of 20% applies from the 16th year of operations.

Growth in Cutting-Edge Technologies

Vietnam’s cloud computing market reached a value of over US$133 million, supported by 27 dedicated data centers and 270,000 servers. The push for digital operations during the COVID pandemic is expected to drive this market to USD 500 million within five years.

Vietnam ranked sixth in Southeast Asia on OpenGov’s 2022 Government AI Readiness Index with a score of 53.96, which is over 20% higher than the global average. In 2021, the AI sector attracted US$23 million in venture capital.

Competitive Labor Costs

Salaries in Vietnam’s information technology industry vary widely. The minimum wage is VND 4,200,000 (~$165), while the average maximum salary, including bonuses, is VND 22,500,000 (~$885). Compared to other countries in SEA, this is significantly low.

Surge in IT Outsourcing

The COVID-19 pandemic has significantly affected daily life and work, creating market uncertainties. Yet, the labor market has adapted positively, with employers and employees quickly adjusting to new hiring and working models. The IT workforce and digital transformation policies have helped lay a strong foundation for economic recovery in 2022.

Accelerance’s 2022 Global Software Outsourcing and Rates Guide recognized Vietnam as one of Southeast Asia’s top two IT outsourcing destinations. Additionally, it was ranked the second most promising in Asia-Pacific for technical skills on the Global Skills Index (2020).

Vietnam’s IT human resources show strong potential for growth and innovation in domestic products. This opens up opportunities for software outsourcing and technological value creation. However, strategic investment, development, and orientation are crucial to achieving socio-economic goals and ensuring the welfare of Vietnamese IT professionals. Businesses, IT talents, and intermediaries can all contribute to talent-driven economic development.

Thriving Startup Ecosystem

A report by Google, Temasek Holdings Pte, and Bain & Co. highlights Vietnam’s growing prominence in the startup scene. 2021 the country attracted US$2.6 billion through 233 private deals, a notable rise from US$700 million across 140 deals in 2020.

During the pandemic, the number of startups in Vietnam doubled by mid-2022. Major investors like Sequoia Capital, Warburg Pincus LLC, and Alibaba Group Holding Ltd. have supported these ventures.

Government officials aim to make Ho Chi Minh City a key destination for tech funding. Recent initiatives focus on attracting foreign investment in high-tech projects and offering incentives to draw international talent and companies to establish innovation research centers.

Vietnam is already seeing success, with its first unicorn, gaming developer VNG Corp, expected to pursue a US listing soon.

Upcoming Trends in the IT Industry in Vietnam 2024 and more

1. Growth in Software Development and IT Services

• Statistics: According to the Vietnam Software and IT Services Association (VINASA), the software and IT services industry’s export turnover reached $3.5 billion in 2023, showing a steady annual growth rate of around 15%.
• Recent Project: FPT Software, one of Vietnam’s largest IT companies, announced a new partnership with Airbus to develop aviation software solutions, further cementing Vietnam’s reputation as a hub for high-quality software development.

2. Rise of Artificial Intelligence and Machine Learning

• Statistics: The AI market in Vietnam is expected to grow at a compound annual growth rate (CAGR) of 20% from 2022 to 2028, according to a report by ResearchAndMarkets.
• Recent News: VinAI, a subsidiary of Vingroup, launched a state-of-the-art AI Research Lab in Ho Chi Minh City. The lab aims to advance AI technologies and foster collaborations with global tech giants.

3. Expansion of Fintech

• Statistics: According to the Fintech Vietnam Report, the fintech market in Vietnam was valued at $9 billion in 2023 and is projected to grow to $18 billion by 2025.
• Recent Project: MoMo, Vietnam’s leading fintech company, raised $200 million in a Series E funding round, bringing its valuation to over $2 billion. The funds will be used to expand its services and reach more underserved customers.

4. E-commerce Growth

• Statistics: Vietnam’s e-commerce market is one of the fastest growing in Southeast Asia, with a projected market value of $39 billion by 2025, up from $13 billion in 2020, according to Google, Temasek, and Bain & Company.
• Recent News: Tiki, one of Vietnam’s leading e-commerce platforms, secured $258 million in a funding round led by AIA Insurance, aiming to enhance its logistics and delivery infrastructure.

5. Cybersecurity Awareness

• Statistics: The Vietnamese cybersecurity market size was valued at $112 million in 2023, with expectations to grow at a CAGR of 15% to reach $230 million by 2028, as per the Vietnam Digital Transformation Report.
• Recent Project: BKAV, a leading Vietnamese cybersecurity firm, launched a new AI-powered cybersecurity solution to protect enterprise systems from sophisticated cyber threats.

6. 5G and Telecommunications Infrastructure

• Statistics: As of early 2024, Vietnam has deployed 5G networks in 16 major cities and provinces, with plans to cover 95% of the population by 2025, according to the Ministry of Information and Communications.
• Recent News: Viettel, Vietnam’s largest telecom operator, announced a collaboration with Ericsson to expand 5G infrastructure, focusing on enhancing connectivity in industrial zones and smart cities.

7. Startup Ecosystem and Innovation

• Statistics: According to the Southeast Asia Startup Ecosystem Report, Vietnam’s startup ecosystem attracted over $1.3 billion in venture capital in 2023, a record high.
• Recent Project: The National Innovation Center (NIC) in Hoa Lac Hi-Tech Park was inaugurated, significantly boosting the startup ecosystem with state-of-the-art facilities and support for tech startups.

8. Digital Transformation in Enterprises

• Statistics: A survey by the Vietnam Chamber of Commerce and Industry (VCCI) in 2023 showed that 70% of Vietnamese enterprises have initiated digital transformation projects, up from 50% in 2020.
• Recent News: Vietcombank, one of Vietnam’s largest banks, implemented a comprehensive digital banking platform, significantly enhancing its online services and customer experience.

9. Government Initiatives and Policies

• Statistics: According to the National Digital Transformation Program, the government aims for the digital economy to account for 20% of GDP by 2025, up from 10% in 2020.
• Recent Project: The Ministry of Information and Communications launched the “Make in Vietnam” initiative, encouraging the development of Vietnamese-made technology products and solutions.

10. Education and Skill Development

• Statistics: According to the Ministry of Education and Training, enrollment in IT-related courses at Vietnamese universities increased by 25% in 2023.
• Recent News: RMIT University Vietnam opened a new School of Science and Technology, focusing on advanced IT disciplines like AI, data science, and cybersecurity, in collaboration with industry leaders.

Effective Approaches for Entering Vietnam’s IT Market

Navigating Regulations and Policies: A Comprehensive Overview

• Stay updated on Vietnamese IT laws and regulations: Foreign companies should consult local experts, attend industry events, and read relevant publications to stay informed of Vietnam’s latest IT and software development laws.
• Collaborate with reputable local partners: Trustworthy local professionals, such as lawyers, accountants, and consultants, can help foreign companies effectively navigate regulations and avoid potential issues.
• Build strong relationships with local authorities: Connecting with entities like the Ministry of Information and Communications and the Department of Information and Communications can facilitate a better understanding of local policies and aid in resolving any arising concerns.
• Safeguard your intellectual property: Intellectual property protection is essential in Vietnam’s growing IT sector. To protect your rights and prevent infringement, ensure the registration of patents, trademarks, and copyrights.
• Adhere to data protection and privacy regulations: Foreign companies must comply with Vietnam’s data protection and privacy laws; having well-structured policies and procedures in place can ensure compliance.

Enhancing Collaboration and Knowledge Sharing

Foreign IT companies should focus on collaboration and knowledge sharing to succeed in Vietnam’s competitive market. Implement these strategies to improve these aspects:

• Build a collaborative culture: Reward employees for effective teamwork and create opportunities for them to work together on projects.
• Use communication tools: Adopt group chats and project management platforms to make information sharing and collaboration easier.
• Form cross-functional teams: Bring together people with different skills and backgrounds to boost creativity and knowledge sharing.
• Set up a knowledge-sharing system: Create a wiki or document repository where employees can share their expertise and learn from others.
• Training and development: Offer employees chances to gain new skills and knowledge they can use in their work.
• Recognize team achievements: Learn from mistakes through post-project assessments and share what you learn with the whole team.
• Promote diversity and inclusion: Encourage collaboration and knowledge sharing among employees with different perspectives and experiences.

Steps for Entering or Expanding into Vietnam’s IT Sector

Companies looking to enter or expand into Vietnam’s IT sector should conduct thorough market research, identify target segments, and develop a detailed market entry plan. This strategy may include partnering with local IT firms, using government support programs, and investing in talent development initiatives. By taking these steps and seizing the opportunities in Vietnam’s IT industry, companies can position themselves for long-term success in this growing market.

Conclusion

Vietnam’s IT industry is booming, driven by a young, tech-savvy population and strong government support. Its rapid digital growth, competitive labor costs, and vibrant startup scene make it a prime spot for investment. Key sectors like software development, AI, fintech, e-commerce, and cybersecurity are on the rise, positioning Vietnam as a major player in the global IT market.

To succeed, foreign companies should stay informed about local regulations, build strong local partnerships, and foster collaboration and innovation within their teams.

Ready to tap into Vietnam’s IT potential? Contact TECHVIFY today. Let our top-notch experts guide you through the landscape and help you achieve your business goals with cutting-edge solutions. Don’t miss out—let’s make your next big move together!