Center of appeal

Vietnam is making significant strides forward in global semiconductor supply chains as a range of leading chip manufacturers establish a presence in the country.

On January 13, US Ambassador to Vietnam, H.E. Marc E. Knapper, held a working session with leaders from the Da Nang City People’s Committee regarding the development of cooperative activities between the US and the central city in the immediate future. Ambassador Knapper said the US is willing to help Vietnam, and especially Da Nang, in developing a semiconductor industry and its further integration into the global supply chain. He noted that since Vietnam and the US established a comprehensive strategic partnership for peace, cooperation, and sustainable development, the US Government has implemented action programs to support Vietnam in developing a semiconductor industry, and many US businesses are optimistic about the prospects for the sector in the country and have expressed an expectation that it will be able to maximize the opportunities arising from the upgrade in bilateral relations.

GREATER ATTENTION

A delegation from US semiconductor giant Marvell then worked with the People’s Committee on January 15 to explore the local environment and cooperative opportunities for semiconductor investment in the city. Dr. Loi Nguyen, Executive Vice President and General Manager of the Marvell Cloud Optics Business Group, expressed a keen interest in the development of the semiconductor industry in Vietnam in general and acknowledged the potential for the industry’s development in Da Nang in particular. One of the leading companies in semiconductor design and data infrastructure provision, ranking in the top 25 globally, Marvell has been in Vietnam since 2013. Marvell Vietnam has two offices in Ho Chi Minh City, with around 300 employees, and plans to expand its headcount to 500 in the near future. The company is interested in the city’s policies to promptly deploy and promote investment.

At a meeting with Prime Minister Pham Minh Chinh in Hanoi last December, Mr. Jensen Huang, President and CEO of US chip giant Nvidia, said the company hopes to establish a base in Vietnam, as it views the country as its home. The base will attract talent from around the world to contribute to the development of the local semiconductor ecosystem and AI and to promote startups, thus boosting the country’s digitalization. Nvidia has already invested some $250 million in Vietnam, and regards the country as a key market. Mr. Huang also recognized Vietnam’s potential and opportunities and its clear strategy, vision, and approach, together with its focus on infrastructure investment in semiconductors and AI and the necessary human resources.

Vietnam’s semiconductor market is witnessing strong growth, with figures from Statista revealing that revenue in the market is projected to reach $19.89 billion this year and grow at a compound annual growth rate (CAGR) of 9.62 per cent in the 2024-2027 period, resulting in a market volume of $26.20 billion by 2027. Within this, integrated circuits will dominate, with a projected market volume of $16.26 billion this year. A report from Technavio, meanwhile, noted that Vietnam’s semiconductor market is projected to reach $7.01 billion by 2028 and grow at a CAGR of 6.69 per cent from 2023 to 2028. Growth in the market will depend on several factors, including sustainable growth in the global semiconductor industry, increasing investments in the industry, and the growing use of the Internet of Things (IoT).

Meanwhile, following a period researching the potential of Vietnam’s semiconductor market, on October 11, 2023, Amkor Technology officially opened a semiconductor assembly and testing factory in northern Bac Ninh province, with capital of $1.6 billion, which is set to enter into mass production this year. The chip factory will

become Amkor’s most advanced facility, delivering next-generation semiconductor packaging capabilities. Beginning with an advanced system for package and memory production, the factory will offer turnkey solutions from design to electrical testing to the world’s leading semiconductor and electronics manufacturers. Mr. Giel Rutten, President and CEO at Amkor Technology, said that within its strategy to build the world’s largest semiconductor plant, Amkor surveyed various locations and decided upon Vietnam. “This was because we see that a lot of semiconductor ecosystems are shifting into Vietnam and they will also support our customers in the country,” he added.

The increase in investment by major semiconductor companies from the US into Vietnam can be partly attributed to Vietnam and the US lifting relations to a comprehensive strategic partnership during President Joe Biden’s visit to Vietnam last September. The two sides emphasized their breakthrough cooperation in innovation and high technology, including semiconductor chips and AI. Vietnam has been invited by the US Government to engage in semiconductor initiatives within the framework of the Organization for Economic Cooperation and Development (OECD). Mr. Huang said that the good relationship between Vietnam and the US has created favorable conditions and a foundation for cooperation in the semiconductor industry and AI.

CORRECT PATH

Other large foreign semiconductor enterprises, such as Intel, Hana Micron, Renesas Electronics, Samsung Electronics, Infineon Technologies, and Qualcomm, are also actively promoting their activities in Vietnam’s semiconductor market. According to data from Intel, it has invested about $1.5 billion in its Intel Product Vietnam (IPV) facility at the Saigon High-Tech Park (SHTP) in Ho Chi Minh City. The facility plays a vital role in Intel’s integrated device manufacturing (IDM) 2.0 strategy (IDM 2.0 strategy), and has created about 6,500 jobs in the high-tech field, including about 2,400 employees directly under Intel. In 2023 alone, it contributed $10.3 billion to export value, or 61 per cent of the total export turnover from SHTP, 18 per cent of the country’s components / electronics export turnover, and about 20 per cent of Ho Chi Minh City’s total export turnover.

Vietnam is already part of tech supply chains, so many global manufacturers in general and those in the semiconductor market in particular view the country as an attractive investment destination. “US companies in the semiconductor industry, for example, want to be in different parts of supply chains, and many others upstream may also want to think about locating in Vietnam to be part of entire supply chains,” said Mr. Suan Teck Kin, Head of Research, Executive Director, Global Economics and Markets Research, at the United Overseas Bank (UOB). “So, that will be one area where some companies will be thinking about how they can capitalize on existing and developing supply chains. They want to be part of it, and their production will be more efficient, saving on transportation and having faster speed to market.”

The country’s semiconductor market is being influenced by surging demand for consumer electronics, most notably smartphones and tablets, amplifying product necessity in both the personal and industrial sectors, according to market researchers IMARC. This momentum is further propelled by advancements in IoT, leading to a burgeoning need for microchips. Additionally, the automotive sector’s pivot towards electric and autonomous vehicles has highlighted the significance of advanced semiconductors, which is also fueling market growth. Together with this, the accelerating pace of digitization and cloud adoption among businesses, which is pushing up demand for data-centric infrastructure that is heavily reliant on semiconductors, also further propels market growth. The trend towards chip miniaturization, aiming for compact yet potent designs, and shifting government policies and prevailing trade dynamics, particularly in leading manufacturing hubs, have created a positive environment for market growth, while rapid advancements in AI and machine learning, innovations in semiconductor manufacturing, such as extreme ultraviolet lithography, and a surging focus on energy efficiency and green initiatives in electronics are also adding to growth.

MEETING MARKET NEEDS

According to the Ministry of Planning and Investment (MPI), in order to implement the content of the Vietnam - US joint statement on boosting ties as it relates to the development of the semiconductor industry, Vietnam has prepared the necessary conditions to work with US businesses and investors in the industry’s supply chain. The country has perfected a onestop mechanism, developed a project to grow human resources in the industry to some 50,000 people by 2030, and established the National Innovation Center (NIC) at the Hoa Lac Hi-Tech Park in Hanoi to host investment projects in the industry by offering appealing incentives.

Mr. Nguyen Phu Hung, Director of the Department of Science and Technology for Economic Technical Branches at the Ministry of Science and Technology (MoST), said Vietnam currently has only 5,000 semiconductor engineers; which is modest given the high-tech nature of the industry. Therefore, Vietnam must focus on training, developing human resources, and promoting research and technology transfer to quickly grasp core technologies in semiconductor development. He added that, in the future, MoST will continue giving priority to national science and technology programs relating to semiconductor chips, work closely with other ministries and agencies to push the national semiconductor chip program, and complete investment policies and incentives for the provision of measurement and testing equipment.

Similarly, US Ambassador Knapper said that to realize the goal of developing Vietnam and especially Da Nang into an attractive investment destination in the industry, the city needs to implement a comprehensive set of solutions to build an ecosystem for its development. This would include education and training, the development of high-quality human resources, infrastructure construction, and enhancing access to renewable energy sources. ◼