Vietnam to reinforce legal semiconductor framework

Vietnam to reinforce legal semiconductor framework, Source: freepik.com

The Ministry of Information and Communications, which is spearheading the drafting of a law on the digital tech industry, will have it reviewed by the National Assembly Standing Committee before the end of September, with the expectation it will be presented in October.

The draft outlines essential policies aimed at fostering the semiconductor industry, a critical component of Vietnam’s digital economy.

It proposes special investment incentives for both new and expanded projects in the semiconductor sector. These incentives are intended to encourage large-scale investments, including mechanisms for investment matching and targeted financial support to draw in projects with widespread influence across the industry.

One of the critical components of the draft law is the establishment of a specific framework for recruiting experts and talents in the semiconductor industry. It also provides a mechanism to assign strategic tasks for semiconductor development to key domestic digital technology enterprises.

Furthermore, the draft law supports the transfer of technology and facilitates mergers and acquisitions involving both domestic and foreign companies operating in the technology sector.

To enhance trade facilitation, the law also introduces a national one-stop mechanism. This mechanism, alongside a proposed green lane, will streamline procedures for exporting and importing goods, raw materials, supplies, and components related to the semiconductor industry, improving efficiency and reducing logistical hurdles for domestic companies.

The draft law offers maximum incentives in terms of investment, tax, finance, credit, and land use to organisations and individuals investing in material and technical infrastructure for semiconductor research and development. In addition, semiconductor manufacturing enterprises and those directly supporting the supply chain will receive preferential tax treatment, land-use benefits, and financial support, aligning with the law’s provisions.

Furthermore, the draft includes significant support for investment costs in building factories for production, assembly, packaging, and testing of semiconductors. This support will come from both central and local government budgets, as defined by the Law on State Budget and other relevant legal provisions.

For key semiconductor projects, the draft law provides special incentives based on existing regulations governing major projects. These projects include those involved in building data centres, digital technology research and development centres, and semiconductor manufacturing facilities, particularly those with investment capital exceeding VND4 trillion ($166 million).

Nguyen Van Hien, director of the Institute of Legislative Studies, said, “The addition of a separate chapter on the semiconductor industry is crucial, as the semiconductor sector plays a pivotal role in the digital technology industry. It significantly influences the country’s economic and social development while aligning with the broader goal of attracting global corporations interested in investing in Vietnam.”

Hien noted that as global corporations increasingly express interest in expanding their operations into Vietnam, it was imperative that the country has a strong legal framework in place to support this influx of investment.

“The draft law provides the necessary structure to enable Vietnam to capitalise on the shift in global semiconductor investments,” he added.

However, some experts pointed out that the cost-based investment support measures included in the draft law need clearer definition to ensure effective application. They warn that generalised provisions could create difficulties for businesses attempting to take advantage of the law’s incentives.

Vu Tu Thanh, deputy regional managing director and Vietnam chief representative for the US-ASEAN Business Council, said it is necessary to have specific cost support measures to encourage investment and development in the semiconductor industry.

“This should include support for electricity and energy costs – particularly renewable energy – along with support for semiconductor manufacturing costs, assembly, packaging, and testing of semiconductor products. There also needs to be support for research and development costs and fixed asset costs for new or expanded projects,” Thanh said.

He noted that the council had proposed several measures to further bolster investment in semiconductor manufacturing and related projects. These measures are based on investment cost models that have been successfully applied by many countries in recent years for multi-billion dollar projects.

“For instance, Article 59 of the draft law establishes the legal framework that allows the use of central and local budgets to support investment costs for projects involved in manufacturing, assembling, packaging, and testing semiconductors,” Thanh said. “However, we recommend that the law specify the authority of ministries or local governments to decide on support measures for specific types of projects. Additionally, the law should define the type and level of support that can be allocated from central or local budgets.”

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On September 21, Prime Minister Pham Minh Chinh signed a decision laying out Vietnam’s semiconductor industry development strategy through to 2030, with a vision to 2050. The strategy is designed to position Vietnam as a key player in the global semiconductor supply chain and to establish the country as a safe and competitive destination for semiconductor production.

The strategy outlines several key initiatives, including the development of specialised chips and core technologies, the fostering of investment in research and innovation, and the creation of a fully integrated semiconductor ecosystem. A fund to support semiconductor research and development will be established, encouraging the creation of domestic chip production centres to reduce costs and foster innovation.

Additionally, the government will roll out maximum incentives for high-tech foreign-invested projects in the semiconductor and electronics sectors, with funding support from both central and local budgets. The strategy also calls for the establishment of a steering committee on semiconductor industry development, chaired by the prime minister, to oversee and drive the execution of the initiatives.

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