The growing semiconductor industry in Vietnam has caught the interest of major technology companies such as Nvidia, who are actively considering opportunities for growth and expansion in the country with the help of the Creating Helpful Incentives to Produce Semiconductors Act (CHIPS and Science Act). Vietnam is a central mode for the semiconductor supply chain, being home to Intel's largest global test and assembly factory.
Overview of Vietnam's Semiconductor Industry
Vietnam is becoming increasingly important in the worldwide semiconductor market, backed by its skilled workforce, government support, and strategic location. As the third-largest US semiconductor partner in Asia, over 10% of chips exported to the United States originate from the country. Vietnam’s semiconductor market growth was at 7.1% from 2016 to 2021, with a valuation of $18.2 billion in 2022.
Vietnam stands out due to its participation in 16 free trade agreements (FTA), more than its neighboring countries. The government offers incentives for high-tech projects, including tax reductions and exemptions. The country also maintains its cost-effectiveness with low labor costs and a skilled workforce, with over 40% of college graduates specializing in science and engineering. Despite its low number of engineers, Vietnam aims to expand its semiconductor workforce tenfold by 2030 with a plan to train 50,000 engineers.
Semiconductor Companies’ Interests in Vietnam
Vietnam’s strength is in the downstream segment of the semiconductor supply chain: the assembly, testing, and packaging (ATP) process. US chipmaking giant Intel’s largest global ATP factory is located in Saigon Hi-Tech Park, Ho Chi Minh City. South Korean chip manufacturer Hana Micron, among whose clients include Samsung, is planning to invest $1 billion into the creation of a second factory in Vietnam’s Bac Giang province on top of an existing plant in neighboring Bac Ninh province. Other global firms such as Qualcomm, Marvell, and Synopsys are also actively expanding their presences in the country.
Critically, American tech and AI behemoth Nvidia – which has recently attained a market valuation of over $2 trillion – has invested $250 million in partnerships with domestic companies in Vietnam, listing Viettel, FPT, Vingroup, and VNG as “the partners Nvidia looks to expand partnership with,” according to CEO Jensen Huang. During his first visit to the country in December 2023, Huang expressed Nvidia’s desire to establish a new base in Vietnam, which he went so far as to call the company’s “second homeland.”
Despite Vietnam’s opportunities for global collaboration on the semiconductor front, there remain challenges and limitations: the country still lacks a skilled semiconductor workforce and instead factors into the supply chain through its labor contributions. It is estimated that Vietnam has only around “5,000 engineers work(ing) in semiconductor design inside Vietnam, most of them scattered among 36 non-Vietnamese chip companies.” According to Nguyễn Đức Minh, a Vietnamese integrated circuit professor, “Vietnam is currently producing just 500 qualified engineers per year,” and the country is facing a brain-drain as students see higher paying salaries in the industry abroad. In addition, “only four Vietnamese companies are currently involved in chip design,” and “Vietnam currently accounts for only 4 percent of global semiconductor-related trade.” In the words of Minister of Science and Technology Huynh Thanh Dat, “Vietnam’s semiconductor industry has a low localization rate... research and development activities are not synchronized.”
Partnership Opportunities with the United States
The United States has nevertheless been particularly perceptive of Vietnam’s “tremendous potential” as a major player in the semiconductor industry. In July 2023, US Treasury Secretary Janet Yellen visited Hanoi to meet with Prime Minister Phạm Minh Chính and discuss deepening US-Vietnamese trade and economic relations; in her remarks, she made direct references to Vietnam’s position as a “critical node” in the semiconductor industry and name-checked US semiconductor companies with manufacturing branches in Vietnam. Among the companies mentioned was the Arizona-based company Amkor, whose $1.6 billion ATP plant in Bac Ninh province was later jointly unveiled by Prime Minister Chính and Amkor CEO Ji Rong-rip in October 2023.
The unveiling was preceded by a major development in US-Vietnamese relations. On September 10, 2023, President Biden met with General Secretary of the Communist Party of Vietnam Nguyễn Phú Trọng in Hanoi, upgrading the United States’ diplomatic relationship with Vietnam to a Comprehensive Strategic Partnership and promising – among other commitments – $2 million in seed funding for Vietnam’s semiconductor workforce development initiatives. Tapping into the $500 million International Technology Security and Innovation Fund allotted by the CHIPS Act for international semiconductor and telecom projects, the joint statement also announced the launch of a Developing Electronics and Leading Technology Advancement (DELTA) network to build and reinforce resilient technology supply chains with a particular emphasis on “promot[ing] talent cultivation, policy coordination, and sector efficiencies in the manufacture of electronic components, against the backdrop of regional trends.” As the Biden administration continues to dole out funding from the CHIPS and Science Act to more and more international recipients, the role of Vietnam as a critical node of the global semiconductor industry – and its relevance to US-Indo-Pacific relations – will only increase in size and importance.
Vincent Zhang is a Spring 2024 Young Professional at the East-West Center in Washington. He is a senior at the Edmund A. Walsh School of Foreign Service at Georgetown University, pursuing a B.S.F.S. in International Politics with a concentration in Foreign Policy.
Arrizka Faida is a Spring 2024 Young Professional at the East-West Center in Washington DC. She received her master’s degree from Cornell University, Brooks School of Public Policy, studying MPA in Science, Technology, and Infrastructure Policy.
Lei Nishiuwatoko is a Spring 2024 Young Professional at the East-West Center in Washington. She recently graduated from Northeastern University, where she obtained a B.A. in International Affairs. Lei has previously interned at the NATO Defense College, WorldBoston, and L.E.K. Consulting.