Vietnam’s ambitious vision for the semiconductor industry

>> Policy perspectives for the development of the semiconductor sector

As an emerging country, Vietnam not only attracts global technology giants, but also supports the growth of domestic businesses, creating a dynamic and competitive ecosystem.

It has long been known as a potential market in the “assembly, test and encapsulation” segment of semiconductors thanks to the presence of factories of large groups such as Intel, Samsung and Hana Micron. However, the ecosystem of this national sector is in fact experiencing remarkable expansion, covering crucial stages of the value chain, even if most of these activities remain dominated by foreign companies.

Twenty years ago, when Vietnam’s semiconductor industry was still in its infancy, Japan’s Renesas, a major semiconductor manufacturer, chose Vietnam to establish its first major design center in the region. This decision marked the beginning of a spectacular evolution. Today, this choice proves to be visionary: Renesas is no longer the only investor in Vietnam in this area. Other global leaders, such as Global Unichip and Faraday Technology (Taiwan-China), Microchip, Marvell, Synopsys and Qorvo (USA), are also present in the country.

One of the reasons for Vietnam’s appeal lies in its successes in the information technology sector, with a particularly skilled workforce. Today, the country is the world’s second-largest supplier of software engineers, a little-known fact. According to Jensen Huang, founder and CEO of NVIDIA, the American artificial intelligence (AI) juggernaut, the country benefits from considerable assets, including family values ​​and a priority given to education.

Against the backdrop of diversifying supply chains and complex geopolitical developments globally, Vietnam is emerging as a preferred destination for investors in the semiconductor industry.

This positioning is explained by numerous assets, such as an environment conducive to business and investment, a qualified workforce as well as the world’s second largest reserve of rare earths. This emerged from the first meeting of the National Steering Committee for the Development of the Semiconductor Industry, chaired on December 14, 2024 in Hanoi by Prime Minister Pham Minh Chinh.

Indeed, according to the 2024 Global Innovation Index (GII) report, unveiled at the end of last September by the World Intellectual Property Organization (WIPO), Vietnam is positioned at 44^e rank among 133 ranked economies, two better than in 2023.

Four main axes

Currently, Vietnam is home to more than 50 companies specializing in chip design with around 6,000 engineers. The “testing and encapsulation” segment has 7 factories, with some 6,000 engineers and more than 10,000 technicians. Companies producing equipment and materials for the semiconductor industry such as Samsung, Seojin, Coherent, etc. have also started their activities there.

In terms of investments, the country has 174 foreign direct investment (FDI) projects in the semiconductor sector, with a total registered capital of nearly USD 11.6 billion. In 2024, revenues from this industry in Vietnam are expected to amount to 6.16 billion USD, compared to 5.58 billion in 2023.

In terms of infrastructure development, the country has created the National Innovation Center (NIC) and several high-tech parks in Hanoi (North), Da Nang (Center) and Ho Chi Minh City (South), as well as many other standard industrial parks to attract more investments from global technology giants.

In the semiconductor value chain, design remains the highest value-added stage, requiring both advanced technical skills and modern infrastructure. If some observers believe that Vietnam is the most competitive in the short term in the “testing and encapsulation” segment, the country published its first Semiconductor Industry Development Strategy in September 2024, which aims to develop, by phase, the entire value chain.

Students from the University of Technology and Education (Da Nang University) during a practical semiconductor circuit design session.

Photo : CTV/CVN

The national strategy is based on a simple but ambitious formula: C = SET + 1, with C for “Chips”, “S” for “Specialization”, “E” for “electronics”, “T” for “Talent” and the “ +1” referring to Vietnam as “a new reliable destination for global supply chains”.

This approach is broken down into four main axes:

First, the country is focusing on the production of specialized chips, especially for strategic applications such as AI and the Internet of Things. Next, it seeks to develop its electronics industry, an essential sector in order to meet the growing demand for semiconductors. At the same time, special emphasis is placed on training specialized semiconductor human resources who are highly qualified in the field of chip design.

Finally, Vietnam aspires to become a secure destination for global supply chains, attracting foreign investment and strengthening its position in the sector.

Many key players

The national strategy roadmap is divided into three phases: 2024-2030, 2030-2040, 2040-2050, with concrete objectives at each stage. For the first (2024-2030), Hanoi plans to host at least 100 companies specializing in design, a small foundry and at least 10 companies specializing in testing and encapsulation.

Vietnam is carving out a prominent place in the global semiconductor value chain, and its companies have taken the lead. The FPT Technological Group and the Army Industry and Telecommunications Group (Viettel), two local pioneers, have already made significant progress. FPT has launched semiconductors dedicated to the Internet of Things in the agriculture and healthcare sectors, among others, while Viettel has developed chips for 5G devices. These two local groups don’t just design. They are also looking to become self-sufficient in the production and packaging of semiconductors in the coming years.

Vietnam also benefits from the support of several foreign partners. South Korean companies such as Samsung, Hanmi Semiconductor and Hana Micron Vina have invested in factories producing substrates, printed circuit boards and packaging equipment in Vietnam. American companies, such as Intel and Amkor Technology, have opened assembly and testing facilities there.

In 2024, the main multinationals in the sector such as Apple, Dell, Intel, Meta, Qualcomm, Texas Instrument (United States), Samsung (Republic of Korea), Xiaomi (China), etc. are present industrially in the country, and have brought with them most of their suppliers such as BYD, Foxconn, GoerTek (China), etc.

A dynamic market

Production of microchips in an industrial zone.

Photo : CTV/CVN

Along with the development of the electronic assembly and production industrial chain, Vietnam is widely encouraging digital transformation, with its desire to become a regional leader in technology and innovation. The arrival of these international giants opens up new perspectives for other investors, particularly in the supply chain. The country’s semiconductor industry now plays a vital role in these global chains, and its influence continues to grow. This growth is supported by international strategic partnerships, which help consolidate the foundations of Vietnamese industry and strengthen its position in the sector.

In 2024, the domestic semiconductor market is expected to cross the USD 6.16 billion mark, driven by the continued expansion of large multinationals. South Korea’s Samsung has made Vietnam its largest product development center in Southeast Asia. Other global players are following this dynamic, such as the American semiconductor giant NVIDIA, which just signed an agreement on December 5 with the Vietnamese government aimed at creating an AI research and development center and a data on AI in Vietnam. This represents a major boost enabling the country to achieve a technological leap in the near future.

Vietnam benefits from a favorable environment for foreign investment thanks to its tax incentives, a young and tech-savvy workforce, a strong commitment to innovation, as well as geopolitical stability. These assets have allowed it to position itself as an attractive destination not only for the semiconductor industry, but also for other technological sectors, notably electronics manufacturers.

The p^r. D^r. Chu Ðuc Trinh, rector of the University of Engineering and Technology, Hanoi National University, stresses that integrating Vietnam into key trade agreements, such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) ) and the European Union-Vietnam Free Trade Agreement (EVFTA), offers it a unique opportunity to expand its market and strengthen its international competitiveness.

The development of the semiconductor industry is Vietnam’s strategic choice and top priority. To support growth, it is necessary to renew its traditional drivers such as investment, export and consumption while promoting new ones such as digital transformation, green transition, circular, collaborative economies but also knowledge and especially new fronts such as semiconductors, AI, Internet of Things, cloud computing, in order to create new production forces, concluded the head of government Pham Minh Chinh.

Thuy Ha/CVN