The semiconductor industry is the keystone of modern technology, driving innovation across various sectors. With a surging demand for advanced microchips, the global semiconductor market is at the forefront of technological progress.
Within this landscape, Vietnam emerges as a notable contender, swiftly ascending the ranks of the global semiconductor market. The country has attracted significant players, including Hanmi Semiconductor from South Korea and Germany’s Infineon Technologies AG, underscoring its growing significance. In a strategic move, the U.S-Vietnam partnership will further help to explore opportunities to grow and diversify the global semiconductor ecosystem, aiming for a more resilient, secure, and sustainable value chain.
In the following sections, we dive deeper into Vietnam’s semiconductor industry, exploring its strengths, challenges, and prospects as it endeavours to meet the growing global demand in this vital sector.
I. Current State of the Semiconductor industry in Vietnam
A. Overview of the current semiconductor market in Vietnam
The semiconductor market in Vietnam is on an exciting trajectory towards becoming a multibillion-dollar industry, with the aim to become a key player in the global semiconductor landscape. This industry is forecasted to attain a revenue of $20.15 billion in the current year and is expected to exhibit a compound annual growth rate (CAGR) of 11.62% from 2023 to 2027, culminating in a market volume of $31.28 billion by 2027. The most substantial segment within the semiconductor industry, integrated circuits, is projected to be valued at $16.44 billion this year.
Furthermore, the U.S.-Vietnam Comprehensive Strategic Partnership acknowledges its potential to become a significant player in the semiconductor market, focusing on developing human resources in the sector with initial funding of $2 million from the U.S. government.
As per information reported in 2023 by the U.S. Census Bureau, there was a notable 75% surge in chip imports from Vietnam within February, making Vietnam the third country in Asia in terms of semiconductor exports to the US, after Malaysia and Taiwan (China). This increase pushed the import figure to $562.5 million, up from $321.7 million in the same period a year prior.
However, Vietnam’s contributions remain minor when the entire supply chain is considered. Despite significant growth in chip imports, Vietnam primarily participates in the final phases of semiconductor production, focusing on assembly, testing, and packaging. This role, while crucial, represents the lower-value end of the supply chain. The nation is actively working to develop its design and packaging capabilities to increase its influence in the global semiconductor industry.
Recent Key Developments in the Semiconductor Industry
As Vietnam advances in semiconductor capabilities, it becomes a compelling example of how strategic partnerships and investments can reshape a nation’s role in the global supply chain.
In a significant move in 2023, the United States has offered its support to Vietnam’s semiconductor aspirations. Recognizing the country’s potential, the U.S. is collaborating with Vietnam to bolster its microchip production. This collaboration includes technology transfer, financial investment, capacity-building initiatives, and a focus on creating a secure and sustainable semiconductor ecosystem in Vietnam.
In addition, the U.S. Department of State is collaborating with the Vietnamese government to investigate possibilities for expanding and enhancing the worldwide semiconductor ecosystem through the International Technology Security and Innovation (ITSI) Fund, established by the CHIPS Act of 2022. This cooperation is geared towards establishing a global semiconductor value chain that is more robust, secure, and environmentally sustainable. Beyond immediate gains, this partnership symbolizes a long-term commitment to fostering technology development and innovation, emphasizing the country’s pivotal role in this evolving sector in the Asia-Pacific region.
The Vietnamese semiconductor industry is not limited to manufacturing alone. With more than 5,000 chip design engineers, Vietnam is gradually establishing its presence in this critical phase of semiconductor production. This growing expertise opens doors for the country to play a more substantial role in the global semiconductor industry, moving beyond assembly and testing to design and innovation.
B. Key players and major semiconductor manufacturers in Vietnam
Vietnam’s semiconductor industry has been attracting significant interest from major players in recent years. While it is still evolving, some key players and major semiconductor manufacturers in Vietnam include:
- Intel Products Vietnam: Intel has a substantial presence in Vietnam, with a factory located in Saigon Hi-Tech Park, Ho Chi Minh City. The company is involved in the assembly and testing phases of semiconductor production.
- Samsung Electronics Vietnam: Samsung, a global tech giant, has invested in various facilities in Vietnam, including smartphone production plants. While not exclusively focused on semiconductors, their operations in Vietnam contribute to the local industry.
- FPT Corporation: FPT has ventured into the semiconductor industry with its subsidiary, FPT Semiconductor. They are engaged in research, development, and design of semiconductors.
- Hanmi Semiconductor: South Korea’s Hanmi Semiconductor has established its branch in Vietnam, particularly in the northern province of Bắc Ninh. It plays a significant role in semiconductor equipment manufacturing.
- Infineon Technologies AG: The German semiconductor giant Infineon Technologies has expanded its operations in Vietnam and established a chip development team in Hà Nội, contributing to semiconductor solutions for power and IoT systems.
- CoAsia: CoAsia, a South Korean semiconductor design firm, has set up shop in Hanoi, Vietnam.
- Amkor Technology: Amkor, another major semiconductor packaging and testing company, has a presence in Bac Ninh Province, Vietnam.
C. Government support of the Semiconductor Industry
Vietnam is building a development strategy and a human resources development plan, along with appropriate regulations, policies and mechanisms, to attract the world’s leading semiconductor manufacturers and designers to the country.
- Vietnam will step up the training of high-quality workforce in semiconductor industry, with the goal of training 50,000 workers by 2030
- Vietnam also advocates building a national semiconductor ecosystem with the participation of various stakeholders, including the Government, businesses, support organizations, universities, research institutes, and financial institutions.
- Vietnam has an abundant workforce in technology, suitable to the semiconductor industry. It has research institutes and training establishments, including the Hanoi and HCM City National Universities, Hanoi University of Science and Technology. Meanwhile, its large corporations, including Viettel, VNPT, FPT and CMC, have good resources and are ready to cooperate to develop the semiconductor industry.
Tax incentives are also implemented as a strong will of Vietnam authorities to attract foreign companies.
- Exemption from land rental and water surface rents fees for the duration of their lease for projects investing in socio-economically deprived areas.
- Businesses investing in the sector can enjoy exemptions from land and water surface rents, or a reduction of up to 50 percent in centralized high-tech parks.
- Hanoi: industrial enterprises in Hanoi enjoy investment incentives such as exemption from corporate income tax for the first four years, a 5% tax rate for the next nine years, and a 10% tax rate for the next 15 years.
- The CIT incentive policy for projects manufacturing SI products was introduced under Law 71/2014/QH13: tax exemption for four years, reduction of 50% of tax payable for the following nine years, and preferential tax rate of 10% for 15 years.
2. Emerging Trends in Vietnam’s Semiconductor Industry
A. Fostering International Alliances: US-Vietnam Partnership
Vietnam’s semiconductor industry is currently marked by a significant trend of collaboration and strategic partnerships, with the recent United States-Vietnam alliance taking center stage.
The U.S. and Vietnam have signed a Memorandum of Cooperation on Semiconductor Supply Chains, Workforce and Ecosystem Development, which aims to strengthen bilateral sci-tech ties and build a more resilient semiconductor supply chain. Under the International Technology Security and Innovation Fund, created by the CHIPS Act of 2022, the U.S. will partner with Vietnam to further develop Vietnam’s current semiconductor ecosystem, regulatory framework, workforce and infrastructure needs.
Furthermore, to prepare human resources for this strategic industry, Vietnam and the U.S. will launch comprehensive workforce development initiatives, such as hands-on teaching labs and training courses for semiconductor assembly, testing and packaging. They will also establish a model of training and incubation center for semiconductor circuit design in Vietnam and form training and research programs for the semiconductor industry at Vietnamese universities.
B. Investment and infrastructure development to boost the semiconductor ecosystem
Vietnam’s semiconductor ecosystem is experiencing a significant boost with substantial investments.
Key provinces such as Bac Giang, Bac Ninh, Thai Nguyen, and Ho Chi Minh City have evolved into significant production hubs for high-tech, high-value semiconductor manufacturing. In total, foreign companies have committed approximately $5 billion to Vietnam’s semiconductor industry.
Several major semiconductor companies from the US, including Intel, Amkor, Marvell, and GlobalFoundries, have pledged substantial investments in Vietnam’s semiconductor industry. Notably, US Amkor Technology plans to start operations at a new $1.6 billion factory in Bac Ninh province, while Synopsys is set to invest in semiconductor design and incubation centers in Ho Chi Minh City. Additionally, Marvell is expected to announce its intentions to establish a global-level design center in Ho Chi Minh City.
Furthermore, Hana Micron, a South Korean semiconductor manufacturer, has already launched its first semiconductor plant in Bac Giang province, marking a $600 million commitment to Vietnam. This facility, which specializes in integrated circuit boards for mobile devices, began its first phase of operation in November 2020. Hana Micron aims to increase its chip production investment to $1 billion by 2025, targeting annual revenues of $800 million and the creation of 4,000 job opportunities for Vietnamese workers.
On August 2022, the CEO of Samsung Electronics met with Vietnamese Prime Minister Pham Minh Chinh and announced a US$850 million investment to manufacture semiconductor components in Thai Nguyen province. Overall, Samsung committed more than 2.6 billion USD in the semiconductor industry at Samsung Electro-Mechanics in this province.
These developments emphasize Vietnam’s successful efforts to attract high-quality foreign direct investment (FDI) projects.
3. Opportunities, Challenges and Future Outlook
A. Opportunities for this industry
- Vietnam has a stable political system, a favorable geographical location, abundant human resources in engineering and technology, and a growing digital infrastructure.
- Vietnam has attracted many foreign semiconductor companies, such as Intel, Mavel, Qualcomm, Amkor, etc., to invest and expand their operations in the country. These companies can share their knowledge and expertise with local partners and support the development of innovative products.
- Vietnam can leverage its existing strengths in electronics manufacturing and assembly to move up the value chain and participate in more complex and high-value stages, such as design, testing, and packaging.
- Vietnam can take advantage of the growing demand for semiconductors in various sectors, such as 5G, Internet of Things (IoT), artificial intelligence (AI), smart cities, etc.. These sectors require advanced and customized semiconductor solutions that can create new market niches for Vietnamese firms
B. Challenges of this industry
- Vietnam lacks a comprehensive semiconductor ecosystem, including local suppliers, design firms, testing facilities, and research institutes.
- Vietnam faces fierce competition from other regional players, such as China, Taiwan, South Korea, and Singapore, who have more advanced technologies, larger markets, and stronger government support.
- Vietnam has to cope with the global shortage of chips and raw materials, which affects the production and export of its electronics products.
- Vietnam needs to improve its investment climate, infrastructure, intellectual property rights protection, and human capital development to attract more foreign and domestic investors.
In the future, the next steps for the sector development are to leverage the existing cooperation agreements with the U.S and other partners to build a more resilient and diversified semiconductor supply chain, to establish a model of training and incubation center for semiconductor circuit design in Vietnam, and to create a conducive ecosystem for the growth of domestic semiconductor enterprises. By doing so, Vietnam hopes to climb up the chip value chain and become a key player in the global semiconductor industry.
C. What is Vietnam doing with its workforce to be prepared for the sector development?
Vietnam is taking a number of steps to prepare its workforce for the development of the semiconductor industry. The government is investing in education and training to develop a pool of skilled workers in semiconductor engineering and technology. The government is also working with industry partners to provide training programs for semiconductor workers.
Some challenges that Vietnam is facing to prepare its workforce for the semiconductor industry include:
- Establishing specialized semiconductor training programs at universities and vocational colleges: A number of universities in Vietnam have established specialized semiconductor training programs. For example, the Hanoi University of Science and Technology offers a Bachelor of Science degree in Semiconductor Engineering. The Ho Chi Minh City University of Technology and Education offers a Master of Science degree in Semiconductor Technology.
- Providing training programs for semiconductor workers in collaboration with industry partners: The Vietnamese government is working with industry partners to provide training programs for semiconductor workers . Additionally, collaborating with universities and training facilities to offer short courses, bachelor’s degrees, master’s degrees, and PhD programs in semiconductor engineering and related disciplines also helps. For example, the Ministry of Industry and Trade has partnered with Samsung Electronics to provide training programs for semiconductor workers at Samsung’s factories in Vietnam.
- Attracting foreign semiconductor companies to invest in Vietnam: The Vietnamese government is attracting foreign semiconductor companies to invest in Vietnam. This is helping to create jobs and develop the semiconductor workforce in Vietnam. Notably, Samsung Electronics has invested $3.3 billion to expand its semiconductor factory in Vietnam.
In addition to the above, the Vietnamese government is also working to create a more favorable investment climate for the semiconductor industry. This includes reducing bureaucracy, streamlining licensing procedures, and providing tax incentives. The government is also working to improve the infrastructure in Vietnam, such as roads, bridges, and airports, to make it easier for semiconductor companies to operate in the country.
Final Thoughts
Vietnam’s semiconductor industry is on the fast track, attracting global heavyweights and riding the wave of strategic US-Vietnam partnerships. bolstered by initiatives like the International Technology Security and Innovation Fund. This collaboration aims to fortify the semiconductor supply chain, develop a robust regulatory framework, and enhance the workforce in both countries.
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