As Inflation Climbs, Vietnam's PC Market on Shaky Ground

Vietnam posted its highest inflation rate in 17 years this month, reporting a 28.3 percent increase in prices as concerns grow about the impact on the country's PC market.

"The market this past quarter really suffered for precisely that reason, " said IDC research director Bryan Ma, noting the market research firm slashed its 2008 PC shipment forecast for Vietnam because of the difficult economic environment.

IDC previously expected to see demand for PCs grow 24 percent this year. That forecast has now been trimmed to an 8 percent increase. "Even since the first quarter of 2008, it's been one of the markets where we flagged it with a warning that it was getting a bit unstable," Ma said.

PC prices have risen in Vietnam along with prices of other goods, making computers less affordable and reducing sales. In addition, the Vietnamese government reduced its spending on IT products, a factor that helped further drive down IDC's forecast, Ma said.

Vietnam isn't the only Asian country facing economic challenges. Rising inflation has been a concern for many Asian countries, as rising commodity prices and the effects of economic turmoil in the U.S. spillover into the region. "A number of the key markets, like China, India and Korea and so forth, are all getting hit a bit," Ma said.

These economic issues have PC makers like Dell closely watching the region, but these issues are seen as short-term concerns that will not undermine long-term growth.

"There is some increased economic instability in the region, so we want to watch it," said Steve Felice, Dell's senior vice president responsible for Asia, adding that Dell hasn't changed its overall view of Asia's long-term prospects. "I still think we're going to see healthy growth."

Ma agreed, adding that IDC's long-term forecast for Vietnam remains optimistic.

At the same time IDC cut its 2008 forecast, it bumped up its 2009 forecast to 29 percent growth, from a previous estimate of 26 percent. "We do expect good growth overall for the long run," he said, echoing the Asian Development Bank's forecast that Vietnam's inflation will moderate next year.

Until then, Vietnam's uncertain economic environment presents opportunities for multinational PC vendors that want to expand aggressively.

"If you're one who subscribes to a contrarian theory, maybe right now is the best time to be looking at Vietnam, given this temporary downturn, if you really believe it will be a long-term growth market," Ma said, adding the same holds true for other Asian countries.

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