Why Vietnam is a hotspot for semiconductor industry investments?

Vietnam’s semiconductor industry is captivating global attention. Fueled by a confluence of factors – a young, tech-savvy workforce, a commitment to innovation, and strategic partnerships – the nation is poised to become a major player in this critical sector. This article explores the exciting opportunities for investors alongside a glimpse into the industry’s current landscape and future trajectory. 

Vietnam’s semiconductor industry 2024 

Vietnam semiconductors market is projected to reach $7.01 billion by 2028 and grow at CAGR of 6.69% from 2023 and 2028, driven by increasing demand for electronic components globally and the expansion of multinational corporations setting up manufacturing operations in Vietnam, as well as the growing use of IoT. In 2024, revenue from Vietnam’s semiconductor industry is forecasted to reach USD 6.16 billion, up from USD 5.58 billion in 2023. 

Therefore, Vietnam is rapidly emerging as a critical player in the semiconductor industry, driven by its ambition to become a regional leader in technology and innovation. The country’s semiconductor industry has become a vital component of global supply chains, positioning itself to play an increasingly important role. This growth is fueled by strategic international partnerships, particularly with the United States, which is helping Vietnam build a strong foundation in the semiconductor sector. 

US-Vietnam partnership: A catalyst for growth in the semiconductor industry 

The collaboration between the United States and Vietnam in the semiconductor industry is expected to be transformative. US Ambassador to Vietnam, Marc Knapper, emphasized the importance of this partnership, stating, “The US is proud to partner with Vietnam in sustainable development programs through high-quality workforce training. We believe Vietnam and the US can build a thriving semiconductor industry for many years to come.” 

As part of a broader initiative, Vietnam is one of eight strategic countries selected to receive support from the US Department of State, which awarded Arizona State University a US$13.8 million grant to drive talent development and provide public policy recommendations. This effort aims to strengthen the country’s workforce and public policies, making it more competitive in the global semiconductor industry. 

This collaboration is central to Vietnam’s long-term goal of becoming a significant player in the semiconductor industry. By leveraging the United States’ expertise and Vietnam’s growing manufacturing capabilities, this partnership is expected to attract further investment and bolster Vietnam’s reputation as a hub for semiconductor production. Learn more about US-ASEAN partnership in a broader view by “Doing Business in ASEAN 2024 – 2025”. 

Investment opportunities and challenges in Vietnam’s semiconductor industry 

The rise of Vietnam’s semiconductor industry presents a wealth of investment opportunities for foreign companies. Vietnam offers competitive labor costs and is strategically located within ASEAN, giving it access to major markets like China, Japan, and South Korea. These factors, coupled with growing foreign direct investment (FDI), make the country an appealing destination for semiconductor manufacturing and related industries. 

In 2024, Vietnam’s semiconductor market is projected to exceed USD 6.16 billion, with major multinational companies continuing to expand their presence. Samsung, for example, has established Vietnam as its largest Southeast Asian product development center, and other global players are following suit, reinforcing Vietnam’s role in the global semiconductor supply chain. 

Tax incentives and government support for the semiconductor industry 

Vietnam’s government is offering attractive tax incentives to draw foreign investment into the high-tech sector, particularly the semiconductor industry. Businesses can benefit from corporate income tax (CIT) reductions, with rates as low as 10% for high-tech projects, compared to the standard 20%. Additionally, companies investing in research and development (R&D) activities are eligible for further tax breaks. 

The government has also introduced policies such as land rent exemptions and import duty exemptions for machinery and materials used in semiconductor manufacturing. These policies reflect Vietnam’s commitment to positioning itself as a regional hub for the semiconductor industry. Furthermore, the establishment of the National Innovation Center in Hanoi and the development of Saigon Hi-tech Park offer key infrastructure support for investors. 

Key players in Vietnam’s semiconductor industry 

Several multinational corporations have already established a significant presence in Vietnam’s semiconductor industry. Intel, for instance, operates one of its largest assembly and testing facilities in the country, while Samsung continues to expand its semiconductor manufacturing capabilities. These investments have solidified Vietnam’s position as a critical hub for global supply chains. 

Other major investments are pouring in from companies such as Amkor Technology, which increased its capital in its Bac Ninh factory by over USD 1.07 billion in 2024, and Foxconn Circuit Precision, which is building a USD 383.33 million factory in Nam Son-Hap Linh Industrial Park. Additionally, Dutch semiconductor company BE Semiconductor Industries N.V. (BESI) invested over 115 billion VND (USD 4.9 million) in a new project at Saigon Hi-tech Park, expected to begin operations in early 2025. 

The entry of these global giants opens doors for other investors, particularly in supply chain development, logistics, and specialized services. As the industry grows, the demand for auxiliary services will increase, creating a range of investment opportunities for small and medium-sized enterprises (SMEs). 

Challenges for foreign investors in the semiconductor industry 

While Vietnam offers considerable advantages, foreign investors must be prepared to navigate challenges within the semiconductor industry. One significant hurdle is the country’s regulatory environment. Although the government is working to streamline regulations, navigating Vietnam’s legal and bureaucratic framework can still be complex, particularly for those unfamiliar with local procedures. 

Another challenge is the workforce development gap. Although the US-Vietnam partnership is aimed at addressing the skill gap, the current labor market cannot yet meet the demands of the rapidly evolving semiconductor industry. According to the Ministry of Information and Communications (MIC), Vietnam requires 150,000 IT and digital engineers annually, but the current workforce only meets 40-50% of that demand. In the semiconductor sector, only about 20% of the labor demand is fulfilled. 

However, initiatives are underway to address this shortage. For example, FPT, one of Vietnam’s leading IT companies, has established the FPT Semiconductor Joint Stock Company and is actively working to train 10,000 engineers by 2030. The Hanoi Semiconductor Investment Festival 2024 highlighted the importance of workforce development as a top priority for the industry, with both local and international companies like Viettel, VNPT, and FPT taking proactive steps to expand their research, development, and production capacity in semiconductors. 

Why Vietnam is a hotspot for semiconductor industry investments? 

Vietnam’s semiconductor industry is at a critical juncture. With strong government support, generous tax incentives, and strategic partnerships with global leaders like the United States, the country is well-positioned to become a significant player in the global semiconductor market. The challenges that exist, such as regulatory complexity and workforce development, are being addressed through ongoing reforms and international collaborations. 

For foreign investors, the time is ripe to explore opportunities in Vietnam’s semiconductor industry. The industry offers attractive incentives and access to a growing market in the ASEAN region. As Vietnam continues to build its capabilities, the semiconductor industry will become a key pillar of its economic development. 

Source: Vietnamnews, Vietnamplus, Technavio