Fifth seeded Prannoy could not maintain the level of play he showed in the opening game as he went down 21-18, 15-21, 18-21 in an hour and three-minute contest.
The loss for the Indian means he will have to wait for his maiden title. The 22-year-old from Kerala earned $1900 for finishing runner-up.
A silver medallist at the 2010 Youth Olympics, Prannoy had stunned top Indian shuttlers -- Parupalli Kashyap and Ajay Jayaram -- in the past.
He had also humbled the likes of former World and Olympic champion Taufik Hidayat of Indonesia and Thailand's Boonsak Ponsana.
Image: HS Prannoy
Photograph: Robertus Pudyanto/Getty Images
India's Prannoy one win away from maiden title at Vietnam
Sports Shorts: Saina progresses; Benzema, Ronaldo on target for Real
Rankings: Worlds bronze puts Sindhu back in top 10
2 Indian cities can SUBMERGE under water by 2070
Sports Shorts: Xavi quits, F1 boss agrees to $100m settlement