Semiconductors can be pillar for growth

This growth is particularly driven by the computing sector’s resurgence in the second and third quarters of 2024. The long-term outlook is equally promising, with the global semiconductor market projected to surpass $1 trillion by 2030, propelled by innovations in AI, electric vehicles, and other cutting-edge technologies.

Vlad Savin, partner, Acclime Vietnam

Vietnam is emerging as a critical hub for semiconductor investments, attracting global attention with its strategic advantages. According to SEMI, an industry association comprising companies involved in the electronics design and manufacturing supply chain, Vietnam’s semiconductor market is expected to reach $18.23 billion in 2024, growing at an impressive compound annual growth rate of 11.48 per cent.

The country’s rise is underpinned by its youthful and skilled workforce, strategic location near major semiconductor hubs like China, Japan, South Korea, and Taiwan, and robust government support. These factors position Vietnam as a viable alternative to China, especially as the US and its allies impose tighter restrictions on semiconductor tech.

Vietnam’s journey into semiconductor manufacturing began in 1979 with the establishment of its first semiconductor facility, Z181. The plant was initially focused on producing and exporting semiconductor components to Eastern Bloc countries. However, this early effort was stopped following the Soviet Union’s collapse and the subsequent trade embargo, which disrupted the industry’s development.

Starting in the 2000s, the industry saw significant expansion, driven by increased government support for high-tech industries and initiatives to enhance local skills. The development of industrial hubs like Saigon High-Tech Park in Ho Chi Minh City and Hoa Lac High-Tech Park in

Hanoi attracted major players such as Intel and Samsung, setting the stage for broader industry growth.

Building on growth

As of December 2024, Vietnam attracted over 170 foreign-invested projects already operational, representing a total registered capital of around $11.6 billion. This robust foundation reflects the growing confidence of global technology and semiconductor companies in Vietnam’s potential to become a key player in the global semiconductor value chain.

Vietnam’s semiconductor industry is steadily growing, with a diverse range of companies contributing to the design segment.

Prominent players such as Renesas, Qorvo, Marvell, Ampere, and Synopsys are key contributors to this industry. These enterprises, whether focused on proprietary designs or outsourced projects, collectively generate significant revenue, showcasing Vietnam’s capabilities in the global chip design market.

In manufacturing, packaging, and testing, major names like Intel and Amkor have established a presence, with more companies expected to join the market soon. A noteworthy milestone for the industry was achieved by FPT Semiconductor, which developed Vietnam’s first integrated circuit chip in 2022.

Building on this success, FPT announced plans in April 2024 to invest $200 million in constructing an AI factory, leveraging Nvidia’s advanced graphics chips and software. These developments underscore Vietnam’s potential to evolve into a competitive player across various stages of the semiconductor value chain.

Vietnam is rapidly emerging as an attractive destination for the semiconductor industry, supported by an existing manufacturing base, a growing ecosystem, and improving infrastructure.

As the US imposes restrictions on China’s semiconductor industry, Vietnam has become a compelling alternative for global firms seeking to diversify their supply chains. The country also boasts a significant demographic advantage, with a youthful and skilled workforce that stands in stark contrast to ageing populations and labour shortages in countries like Japan, South Korea, and parts of Europe.

Government support has further bolstered this momentum, as Vietnam outlines a clear vision for its semiconductor industry, aiming to achieve key milestones by 2030. One of the government’s initiatives involves allocating $1 billion to train 50,000 semiconductor engineers by 2030, significantly increasing from the 5,000 engineers currently in place as of summer 2024.

Vietnam’s strategic location near major semiconductor hubs, including China, Japan, and South Korea, positions it as an integral player in the global value chain. Its affordable manufacturing costs and trade agreements enhance its appeal to investors. Vietnam’s expanding pool of skilled labour, which includes over 5,500 chip design engineers, demonstrates its readiness to contribute to the global labour market and address talent gaps in the industry.

Additionally, Vietnam’s vast rare earth reserves, the second largest globally, offer a unique opportunity to build a fully integrated semiconductor supply chain. The government envisions the area around Ho Chi Minh City’s new airport in District 9 as a budding “Silicon Delta,” potentially rivalling Taiwan’s Hsinchu Science Park, which houses global giants like TSMC and UMC.

By 2030, Vietnam aims for high-tech products to account for 45 per cent of its manufacturing and processing output, signalling its commitment to becoming a major player in the global semiconductor ecosystem.

Strategic relationships

The Vietnam-US Comprehensive Strategic Partnership, announced in September 2023, has significantly bolstered Vietnam’s semiconductor ambitions.

The United States has committed to strengthening collaboration on semiconductor supply chain resilience, supporting the development of Vietnam’s high-tech workforce, facilitating the renewable energy transition, improving the regulatory framework to attract high-quality investments, and advancing cooperation on critical minerals.

A standout example of this collaboration is in the Electronic Design Automation industry, where US companies hold a dominant position in the global supply chain. Synopsys is working with Vietnam’s Authority of Information and Communication Technologies Industry to establish a cutting-edge semiconductor research institute, while Cadence has partnered with FPT, the University of Arizona, and Vietnam’s National Innovation Centre to train local engineering talent.

Taiwan also shows its interest in Vietnam’s potential. Its Southeast Asia Impact Alliance and a Vietnamese fund management firm have joined forces to establish the Southeast Asia Semiconductor Centre and the Southeast Asia Semiconductor School. These initiatives are designed to drive collaboration in semiconductor research and development, creating a dynamic nexus of technology, talent, and industry.

By fostering innovation and bridging the gap between Vietnam’s skilled semiconductor workforce and Taiwan’s advanced semiconductor enterprises, these entities aim to build a robust semiconductor ecosystem in Vietnam, positioning the country as a key player in the region’s high-tech landscape.

Meanwhile, Prime Minister Pham Minh Chinh in September 2024 issued the strategy for the development of the Vietnamese semiconductor industry. In phase 1 towards 2030, Vietnam aims to leverage its geopolitical advantage and skilled semiconductor workforce to engage selective foreign direct investment. The goal is to develop into one of the global centres for semiconductor human resources, establishing foundational capabilities across all stages of the semiconductor industry, including research, design, production, packaging, and testing.

Phase 2, from 2030 to 2040, focuses on becoming one of the global centres for the semiconductor and electronics industries. This phase emphasises the development of these industries by combining self-reliance with foreign investment.

The third phase to 2050 strives for Vietnam to become a top nation in the world in the semiconductor and electronics industries. The country aims to master research and development in these fields, solidifying its position as a global leader.

Vietnam’s role in the global semiconductor value chain is steadily growing as the country positions itself as a hub for chip design, testing, packaging, and material production. Despite the absence of domestic chip manufacturing facilities, Vietnam’s skilled workforce, cost advantages, and strategic partnerships with global tech leaders have allowed it to carve out a niche in this highly competitive industry.

For international investors looking to tap into Vietnam’s semiconductor market, understanding the Vietnamese regulations and leveraging government incentives can provide a strong foundation for entry.

Looking ahead, Vietnam has competitive edges to become a significant player in the global semiconductor market. With strategic investments in infrastructure, education, and policy incentives, combined with its ability to pull in multinational corporations, the country is poised to climb further up the value chain.

By fostering innovation, enhancing technical capabilities, and strengthening international collaborations, Vietnam could play a transformative role in shaping the future of the semiconductor industry.

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