Vietnam can follow in the footsteps of Singapore in semiconductors

February 15, 2024 | 11:03
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Singapore’s transformation from a nation with nothing to a “semiconductor valley” will be a very useful reference for Vietnam.

With the disadvantage in national acreage with only and population shortage, the Lion City aims to attract investment and produce goods for the globe. But, it had to be an industry with a high-value increase, and consequently electronics was chosen.

Vietnam can follow in the footsteps of Singapore in semiconductors
Low Teck Seng, Senior vice president National University of Singapore

Since the 1960s, Singapore has attracted large companies, like Siemens and Philips, to establish production facilities, primarily focusing on consumer appliances. Many of these businesses relocated their semiconductor factories to Singapore as they moved up to higher value-added levels. Singapore decided to start its own semiconductor companies in response to this trend.

The island nation decided to build a semiconductor microelectronics industry. With a distinctive vision, Singapore’s government viewed this as a crucial sector that would become more and more important to other industries. Semiconductors are among the high value-added industries with a high knowledge base.

When funded correctly, it not only lures companies and nurtures talents, but also expands on a global scale, resulting in a worldwide position, fostering collaborations with other nations to implement related projects.

Singapore initially entered the semiconductor supply chain from scratch. The government drew foreign companies to Singapore to kickstart the electronics industry. In the early stages, startups did not generate high profits, so Singapore created mechanisms to attract investment, gradually forming large semiconductor manufacturing facilities.

For instance, Philips made irons when it first arrived in Singapore and later switched to making radios. Accordingly, Singaporean companies produced wave detectors and tuners for the global market. Over time, they developed manufacturing capabilities to participate in the value-added chain. Now, Singapore has all the components in the value chain in the semiconductor industry, from assembly to design, measurement, and testing.

In the past 30 years, Singapore’s semiconductor and electronics manufacturing journey has reached stability, focusing resources on research and investing in the development of new semiconductor materials. Additionally, a strategy in robotics technology has greatly supported the enhancement of Singapore’s semiconductor and electronics industry.

As of now, the semiconductor and electronics industry contributes 9 per cent to Singapore’s GDP and constitutes 42 per cent of total manufacturing output. Singapore comes in second in terms of the number of factories after Taiwan, with the entire value chain owned by the market, from equipment manufacturers to material suppliers. This city-state also holds most major microchip design centres, such as Qualcomm, Broadcom, Marvell, and Media Tech.

Due to political issues between the US and China, some manufacturers are proposing strategies to shift production bases from other countries to Vietnam to meet global digitalisation demands and contribute to economic development in the new era of the digital age. If Vietnam accepts this gift, it will open up a new future.

Vietnam is advancing rapidly in the overall industrialisation process, particularly in luring overseas semiconductor manufacturers to the country. Vietnam could apply what Singapore did, by investing in lab facilities. This investment requires millions of US dollars. Having said that, in the initial stages, a reasonable funding through collaboration with startup companies is inevitable as it serves as the role of bait to draw in funders.

Additionally, it is critical to grow domestic companies and draw in foreign investors to the sector at the same time. Thus, a new generation of manufacturers and entrepreneurs in the semiconductor field can be developed gradually.

The semiconductor area is an ecosystem with many sectors, and some areas require humongous investments, such as semiconductor fabrication plants, which typically require an investment around $4-5 billion. This part can be left to tech giant outsiders. As with Singapore, at first, foreign companies built fabrication plants, investing in them because they had financial strength. Afterwards, Singapore gradually participated in various parts of the chain, enhancing capabilities and eventually developing and getting more deeply involved.

There are numerous subfields in semiconductors including testing, assembling, and designing. Singapore first made investments in assembly and testing before progressively transitioning to the design stage

Vietnam has many opportunities because it has a developed agricultural sector and a long coastline for the growth of aquaculture or fisheries, as well as areas like biotechnology and pharmaceuticals.

Opportunities to develop solutions for these industries are myriad. Solutions can be proposed based on the current global digitalisation trend. In the evolution of all industries, electronics are essential for generating AI or blockchain. The more data we have, the smarter we become to support the emergence of the digitalisation process.

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By Low Teck Seng

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