21st Century Business Herald reporter He Liuying reported from Shenzhen
More and more tech companies are looking at Vietnam.
Recently, Vietnamese Prime Minister Pham Minh Chinh met with Nvidia CEO Huang Jenxun, who also participated in a panel discussion on "Semiconductor and Artificial Intelligence Industry Development Trends and Vietnam's Opportunities".
Huang reportedly said Vietnam is a partner of Nvidia. Nvidia will further expand its existing partnership with Vietnam. Nvidia has pledged to make Vietnam a second home for Nvidia and to establish a legal entity in Vietnam.
Nvidia is not the only technology company coming to Vietnam. In October this year, American packaging and testing giant Amkor Technology inaugurated its latest factory in Bac Ninh, Vietnam, which will be the most advanced 57-acre chip factory in Bac Ninh, Vietnam, providing next-generation semiconductor packaging capabilities. In September, Hana Micron, a South Korean semiconductor company, officially inaugurated its No. 2 manufacturing plant in Unjung Industrial Park, Bac Giang Province.
"Due to geopolitical conflicts, trade disputes (such as the US-China trade war) and the pandemic, many companies are looking to diversify their supply chains. This has led to a shift in some semiconductor production activities from traditional East Asian centers such as Chinese mainland, Taiwan, and South Korea to Southeast Asian countries. Hu Jie, professor of practice at Shanghai Advanced Institute of Finance, Shanghai Jiao Tong University, director of the Fintech Innovation Base (Nanjing) and executive director of the Southeast Asia Center, told the 21st Century Business Herald reporter.
In this process, can Vietnam seize the opportunity to achieve the long-term development of the semiconductor industry? In this regard, a number of interviewed experts told 21 reporters that the demographic dividend and abundant natural resources are the advantages of Vietnam's development of the semiconductor industry, and compared with the landlocked countries in Southeast Asia, Vietnam, a coastal country, has the advantage of shipping. However, at the same time, there are also obvious constraints to industrial development, including talent shortage, insufficient infrastructure matching capacity, and imperfect industrial chain, which are all problems that Vietnam is facing.
According to many of the experts interviewed, Vietnam still has a long way to go before it can achieve its semiconductor ambitions.
Tech companies rush to Vietnam
It is worth pointing out that Vietnam has been favored by technology companies for many years.
Back in 2006, Intel first announced a $1 billion investment to build a chip assembly and test manufacturing plant in Vietnam's Saigon Hi-Tech Park. In January 2021, Intel announced an additional USD 475 million investment in Intel Products Vietnam (IPV).
Samsung Electronics in Thai Nguyen also celebrates its 10th anniversary this year, having invested $2 billion in initial capital 10 years ago and has now invested more than $7.5 billion in Taiyuan.
Hu Jie pointed out that Vietnam offers relatively low labor costs and production costs, which is attractive to technology companies looking to reduce costs and improve profit margins.
It should be pointed out that, in addition to cost considerations, the semiconductor investment layout of major enterprises in Vietnam has been more affected by changes in the global industrial chain.
"As the global political landscape changes, especially the tensions between the U.S. and China trade relations, many companies are also reevaluating their global footprint. Moving a portion of their operations to countries such as Vietnam helps these companies diversify their risks and ensure the stability and reliability of their supply chains. ”
Xia Ri, a researcher at Anbang Think Tank, shared the same view, telling the 21st Century Business Herald reporter, "With the tightening of U.S. semiconductor export control policies, these world's largest semiconductor companies must take action to seek potential partners to diversify their supply chains and reduce the negative impact of geopolitical factors." ”
In fact, not only Vietnam, but also Singapore, Malaysia and other Southeast Asian countries are accumulating efforts to develop the semiconductor industry. In contrast, Singapore has a relatively complete and mature semiconductor industry chain from design, manufacturing, to packaging and testing. Malaysia enjoys the reputation of "Silicon Valley of the East" and is one of the important exporters of semiconductor products in the world. According to the Asian Development Bank's "ASEAN and Global Value Chains" released in March this year, Malaysia has a 13% share of the global chip packaging and testing field with the help of OSAT (Outsourced semiconductor assembly and test).
Vietnam also focuses on packaging and testing. Some analysts believe that excessive concentration at the low end of the value chain is not conducive to the long-term development of the industry. In this regard, a number of experts expressed different opinions.
Hu Jie believes that although Vietnam is currently mainly engaged in foundry business in the semiconductor field, this also provides Vietnam with an opportunity to enter this high-tech field. In the short term, the foundry business can bring immediate economic benefits and employment opportunities, while also accumulating capital and experience for Vietnam's long-term development.
"From a historical point of view, the domestic industry has also developed step by step from the foundry industry, which requires a time accumulation process. From the perspective of the value chain, in the context of Moore's law tending to the limit, packaging technology is also one of the hot spots of global competition, and Vietnam's packaging technology reflects a lot of advantages. Summer added.
In the view of Wang Jingru, a senior analyst at the Wanchuang Research Institute, even if the current "foundry" business is still at the low end of the industry, it is still a worthy type of industry for Vietnam's export-dependent economic structure.
According to the Industrial Development Bureau of the Ministry of Industry and Trade of Vietnam, the export value of Vietnam's electronics industry reached more than US$114 billion in 2022, a year-on-year increase of about 6%. Vietnam is now among the top 15 exporters of electronics in the world.
"If the upgrading and development of semiconductors can be achieved with the help of initial industrial reserves, it will be conducive to the optimization of Vietnam's economic structure. Wang Jingru added.
There are still many constraints
With the successive establishment of major technology giants, Vietnam's semiconductor ambitions are gradually rising.
This can be seen from the policy level, Vietnam has formulated the draft "Vietnam Semiconductor Chip Industry Development Strategy to 2030 and Long-term to 2045", aiming to develop the semiconductor industry and even the electronics industry, and hope to attract global semiconductor companies to Vietnam for production and R&D.
Linda Tan, chairman of the Southeast Asian Semiconductor Industry Association, also publicly expressed confidence that it is expected that Vietnam's semiconductor market will grow by 6.12% in the 2022-2027 period. With the increase in investment in the semiconductor industry, Vietnam has the potential to become a partner in this field for many world powers.
According to the forecast of research firm Technavio, Vietnam's semiconductor market will increase by about US$1.65 billion between 2020 and 2025.
For now, Vietnam's role in the global semiconductor value chain needs to be strengthened. The Semiconductor Industry Association (SIA) has pointed out that packaging accounts for about 6% of the value of chips, more than 53% in design, and 24% in the production stage (foundry). Vietnam's semiconductors, which are still in the packaging stage, do not have a profit advantage.
In addition, the 2023 SIA Factbook released by SIA in May this year shows that global semiconductor sales increased from $139 billion in 2001 to $574 billion in 2022, with a compound annual growth rate of 6.67%. In 2022, U.S. semiconductor companies have the largest market share of 48%, and South Korea, Japan, the European Union, Chinese mainland, and Taiwan occupy a global market share of between 7% and 19%. Obviously, Southeast Asian countries, including Vietnam, also do not occupy a market advantage.
At the same time, Vietnam's high dependence on foreign investment in semiconductors is often criticized. "Foreign companies play a leading role in Vietnam's semiconductor industry, especially in the export market. The production of these enterprises is mainly aimed at the international market, and the products are mainly exported to all parts of the world. Hu Jie said.
According to the data, in 2021, Vietnam's FDI enterprises contributed 97.8% to the country's total electronics industry exports, with a total contribution of US$49.7 billion.
It should be pointed out that "Vietnam is facing strong competition from countries where the semiconductor industry is already mature and highly developed, such as Chinese mainland, Taiwan, South Korea, etc. Hu Jie said.
However, it is clear that local companies do not have sufficient market competitiveness. FPT Corporation is one of the largest IT service companies in Vietnam, and although the company started late in the semiconductor field, it is entering the market by providing software and system integration services, Hu Jie said; Technolog is the technology subsidiary of Vietnam Post and Telecommunications Group (VNPT), which focuses on the development and manufacturing of communication equipment and electronic products, while there are also small businesses in Vietnam that are involved in the semiconductor supply chain, mainly focusing on low-end manufacturing, such as printed circuit board (PCB) production.
In the field of chip R&D and manufacturing, the overall development of local enterprises in Vietnam is lagging behind. One of the latest developments occurred in October this year, when Viettel, a Vietnamese military telecommunications industry group, announced the successful development of 5G chips and artificial intelligence (AI) assistants, which local media called "Vietnam's first 5G DFE chip" and said that "a comprehensive grasp of the chip design process is an important step for Vietnam to deeply integrate into the global semiconductor industry".
In Hu Jie's view, "compared with the world's leading semiconductor producers, Vietnam still has a big gap in high-end technology research and development. The labor required in the semiconductor industry is knowledge-based, requires in-depth training, and cannot be achieved overnight. ”
The data shows that the current semiconductor talent gap in Vietnam is very large. Vietnam's Ministry of Information and Media estimates that Vietnam's semiconductor industry has an average annual manpower requirement of 5,000 to 10,000 engineers, but currently meets less than 20% of the market.
"Vietnam's power supply is unstable, and semiconductors not only consume a lot of electricity, but also have extremely high requirements for power stability. Vietnam's energy supply and infrastructure construction are clearly insufficient, such as the shutdown of power rationing in Vietnam this summer, which forced the shutdown of Foxconn and Samsung's industrial parks. Summer said.
Overall, Hu Jie believes that although the foundry business has brought initial success to Vietnam, it still needs to overcome some challenges to achieve the transition from low-end to high-end value chain, including the improvement of technological innovation capabilities, talent training, increased R&D investment, and further integration with the international market.
Take multiple measures at the same time
At present, Vietnam is taking multiple measures to support the development of the country's semiconductor industry.
In order to attract semiconductor enterprises to land, Vietnam has formulated a number of preferential industrial policies. For example, if you settle in different national high-tech parks, you can enjoy different tax incentives and income tax exemptions or exemptions for profit-seeking enterprises.
In order to cultivate more semiconductor talents, the Vietnamese government issued a resolution in August last year, instructing the Ministry of Planning and Investment and related institutions to formulate human resource development projects for the semiconductor industry by 2030 and the vision to 2045, focusing on training 50,000 semiconductor talents, including 15,000 design engineers.
At the same time, in order to promote investment, the National Assembly of Vietnam recently passed the formation of an investment fund to support enterprises investing in high-tech industries, including the semiconductor industry.
In the field of design and manufacturing, Vietnam has also recently received good news. Chipmaker Marvell Technology announced plans to build a world-class design center in Ho Chi Minh City, Vietnam, and electronic design automation company Synopsys said it signed a memorandum of understanding with the National Innovation Center (NIC) of Vietnam's Ministry of Planning and Investment on September 18 to support NIC in establishing a new semiconductor design incubation center in a high-tech park.
Hu Jie believes that with the introduction and localization of technology, as well as the increased market demand for high-tech products, Vietnam has the potential to gradually develop into a more high-end semiconductor manufacturing and design field.
In fact, for the semiconductor industry, Vietnam has its own unique development advantages. "Including the geographical location, the country is located in the center of Southeast Asia, easy access to China, Japan and South Korea and other world-class semiconductor supply chains, secondly, Vietnam has abundant rare earths and silica sand and other semiconductor raw materials, sufficient labor is also a major advantage, Vietnam is currently in the demographic dividend period, can provide a steady stream of young labor for the semiconductor industry, help reduce costs, the formation of international comparative advantages. Summer said.
Looking ahead, Hu Jie believes that with the advancement of technology and the expansion of production capacity, Vietnam is expected to play a more important role in the regional and even global semiconductor market. "While currently focusing on low- to mid-range manufacturing, Vietnam is gradually trying to shift to higher value-added activities, such as chip design and advanced manufacturing, which will take time and more technology accumulation. ”
Wang Jingru also said that the current scale of Vietnam's semiconductor industry is still relatively small, and it will take time to form a certain scale effect. At the same time, from the low-end of the industry to the high-end, it will also go through a relatively long stage.
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