Vietnamese AI startups and the challenge of achieving sustainable competitive advantage.

The core challenge for AI (artificial intelligence) startups at the application level is not just creating a product, but also building the foundations that make that product difficult to replace in the long term.

Artificial intelligence has dramatically changed the way tech startups are created. (Source: Pexels)

Great opportunities, intense competition.

In recent years, AI has dramatically changed how tech startups are born. Thanks to readily available AI models, open source code, and increasingly accessible digital infrastructure, small groups can now create AI products faster and with fewer resources than before. This opens up significant opportunities for AI startups in Vietnam. But this very accessibility also poses a more difficult question: When many businesses can integrate AI into their products, where will the real competitive advantage come from?

Furthermore, another question arises, no longer whether businesses can implement AI, but whether they can build a sufficiently sustainable competitive advantage to avoid being quickly replaced.

The AI ​​value chain can be visualized through three main layers. The infrastructure layer provides chips, servers, and data centers. The underlying model layer is where core AI models are developed. The application layer is where businesses use these existing models to solve specific problems for users or organizations, such as customer service support, learning analytics, text processing, speech recognition, or personalizing user experiences.

Given the current conditions in Vietnam, focusing on the application layer is a more practical approach for most AI startups. Building large-scale computing infrastructure or developing underlying models requires significant capital, technical personnel, and operational capabilities. Meanwhile, the application layer allows startups to leverage existing platforms to solve specific problems in the local market.

According to Amazon Web Services (AWS)'s study on unlocking AI potential in Vietnam , approximately 47,000 Vietnamese businesses adopted AI solutions in 2024. In total, nearly 170,000 businesses, representing about 18% of businesses in Vietnam, have implemented AI, up from 13% the previous year. Among startups, about 55% are using AI in some form, and 35% are applying AI to develop entirely new products or services.

These figures show that the opportunities at the application level are enormous, but competition will also become increasingly fierce. As more businesses can add AI to their products, the sustainable advantage will no longer lie in simply "having AI," but in products that better understand customers, have better proprietary data, and are more deeply integrated into customers' real-world operations.

From a practical standpoint, the major challenge lies not in creating a new AI feature, but in maintaining a competitive advantage long enough for sustainable business growth. A product that is good today can quickly be copied by competitors if they use the same technology, common data, and customer approach.

Therefore, the core issue for AI startups at the application layer is not just creating a product, but also building the foundations that make that product difficult to replace in the long term. Accordingly, without proprietary data, deep industry insights, or a tightly integrated role in customers' daily operations, an AI product remains highly susceptible to copying.

Zalo has become an integral part of daily routines for users in Vietnam. (Source: Zalo)

What should Vietnamese businesses do?

In this context, Vietnamese AI startups need to focus particularly on the two most important platforms to create a sustainable competitive advantage.

First , there's data. In AI, data isn't just technical input; it's an asset that accumulates over time. Businesses that accumulate their own data, especially data related to a specific industry, user behavior, or local needs, will gain an advantage that competitors will find difficult to quickly catch up with. However, data is only truly powerful when it's difficult to access, gradually accumulated through real-world use, or tightly coupled to a specific context that competitors can't easily replicate.

The story of ELSA Speak is a clear example of how an AI business can build an advantage from data. This AI-powered English speaking learning app was co-founded by Van Dinh Hong Vu, a Vietnamese entrepreneur. ELSA not only uses AI to grade pronunciation, but also accumulates data from learners' speaking practice: where they mispronounce words, which sounds they struggle with, how they are progressing, and what types of exercises they need next.

A key lesson from ELSA is that private data isn't something startups have from the start. It's built gradually through each user's practice sessions, feedback, and repeat use of the product. The more learners use the product, the better the business understands their pronunciation errors, practice needs, and progress journey. This loop helps to personalize the product and make it harder to copy.

Secondly , there's the switching barrier, which makes it difficult or unwilling for customers to switch to another solution. An AI product is only truly powerful when it becomes an integral part of the customer's daily work or life. At that point, the product's value lies not only in its features, but also in the accumulated data, established usage habits, integrated processes, and the effort the customer would have to put in if they switched to a different solution.

A relatable example is the Zalo app. Although not a purely AI startup, Zalo demonstrates why a technology product is difficult to replace once it becomes part of users' daily habits. According to data updated in the first half of 2025, Zalo reached 78.3 million monthly active users and approximately 2 billion messages per day. The platform also attracts around 20 million users utilizing its intelligent AI features each month, according to Vietnamnet .

What makes Zalo so difficult to replace is the extent to which the platform is integrated into users' repetitive daily activities such as messaging family, exchanging work-related information, sending documents, making calls, contacting clients, joining class groups and company groups, and receiving information from organizations.

When chat history, contacts, work groups, shared files, and communication habits are all accumulated on the same platform, the cost of switching becomes very high, so users are often reluctant to switch to another app, even if that app has some new or better features.

The lesson from Zalo isn't that every AI startup has to become a major messaging platform. More importantly, it's about the logic of creating a competitive advantage: If a product is just a standalone tool, customers might try it and then abandon it. But if the product becomes a place where customers store data, form habits, connect with others, or handle a significant part of their daily work, they'll be less likely to switch to another solution.

For Vietnamese AI startups, the challenge is no longer whether they can create an AI product, but whether they can transform their proprietary data, industry knowledge, and customer engagement into a long-term competitive advantage. AI businesses can only survive if their products are not just interfaces placed on pre-existing models, but systems that continuously learn from data, users, and usage context.

At the Biztech 2026 plenary session themed "Agentic AI Era: Operational Automation and New Growth Drivers," held on May 13th and organized by the Vietnam Software and Information Technology Services Association (VINASA), Mr. Nguyen Van Khoa, Chairman of VINASA, stated that the AI ​​adoption rate among Vietnamese businesses currently stands at 65% – a significant increase from 61.2% at the end of 2025. Organizations integrating a "digital workforce" are accelerating work processing speeds by up to 300%, and profits from Agentic AI yield an average return on investment (ROI) of up to 171%, three times higher than older solutions.

In the coming period, to develop AI in the spirit of "Make in Vietnam to lead" - mastering core AI technologies and developing AI products in Vietnam, Vietnam will focus on four major groups of solutions: perfecting the institutional framework; developing high-quality human resources; developing strategic infrastructure; and promoting the development and expansion of digital technology businesses internationally.

Source: https://baoquocte.vn/startup-ai-viet-and-the-problem-of-sustainable-profit-393181.html