Vietnam's Semiconductor Ascent: From Assembly to Ambition

1. Summary

Vietnam is rapidly emerging as a key player in the global semiconductor industry. Leveraging its political stability, strategic location, and a young, dynamic workforce, the country is transitioning from a focus on assembly and packaging to a more integrated role that includes IC design. This shift is supported by strong government initiatives, significant foreign direct investment (FDI) from industry giants, and a growing ecosystem of domestic companies. While challenges such as a skilled labor shortage and infrastructure needs remain, Vietnam is taking concrete steps to address them, positioning itself as a vital and resilient node in the global semiconductor supply chain.

2. History of Semiconductor IC Development in Vietnam

Vietnam’s journey in the semiconductor industry began as early as 1979 with the establishment of the Z181 factory, which produced and exported basic components like diodes and transistors. This early start, however, faced setbacks due to global political shifts in the late 1980s, which led to a loss of orders and a halt in production. For years, the industry remained dormant.

A significant turning point occurred in the 2000s, particularly with Intel’s $1.5 billion investment in a state-of-the-art chip assembly and testing facility in Ho Chi Minh City’s Saigon Hi-Tech Park in 2010. This landmark investment marked Vietnam’s re-emergence on the global semiconductor map and catalyzed further interest and investment in the country’s electronics sector.

3. Recent Background

Over the last five years, Vietnam has experienced a significant shift towards higher-value activities within the semiconductor industry, particularly in IC design and engineering services. While assembly and testing remain a cornerstone, there has been a notable expansion in R&D and design, driven by both multinational corporations and domestic players.

Growing Hub for IC Design: Several major international design and EDA (Electronic Design Automation) companies have expanded their footprint in Vietnam. Synopsys, a leader in EDA tools, has been active in Vietnam for years, collaborating with educational institutions and recently announcing a chip design and incubation center. Marvell has also established a significant presence, with a large design center in Ho Chi Minh City. Renesas, a major Japanese chipmaker, has a long-standing design center in Vietnam, contributing to the development of the local talent pool.
Expansion in Engineering Services: The engineering services outsourcing (ESO) sector has also seen growth. eSilicon, before its acquisition by Synopsys, was a notable player in the ASIC design services space in Vietnam. Uniquify, another design services company, has been operating in Vietnam for several years, providing specialized IP and design services to a global clientele.
Emergence of Domestic Players: A key development has been the emergence of domestic companies in the IC design space. FPT Semiconductor, a subsidiary of the FPT Corporation, has launched its own line of ICs, signaling a move towards creating a more self-sufficient domestic industry.
Cloud Computing and Server Processors: The establishment of a design center by Ampere Computing in Ho Chi Minh City highlights Vietnam’s growing role in the development of cutting-edge technologies, including cloud-native server processors.
Strengthened International Partnerships: A pivotal development was the upgrade of the U.S.-Vietnam relationship to a Comprehensive Strategic Partnership in September 2023. This has paved the way for new collaborations and support for Vietnam’s semiconductor ecosystem, including initiatives under the U.S. CHIPS Act.

4. Potential for Vietnam in the Semiconductor Industry

Vietnam’s potential is multi-faceted and significant:

Assembly, Testing, and Packaging (ATP) Hub: Vietnam is solidifying its position as a global leader in the ATP segment, which is a critical part of the semiconductor supply chain.
IC Design and Engineering Services: With a growing pool of over 5,000 chip design engineers and strong government support for workforce development, Vietnam is well-positioned to become a hub for IC design and verification outsourcing services. This segment is particularly attractive due to its lower capital investment requirements compared to manufacturing.
Strategic Role in Supply Chain Resilience: As global companies seek to de-risk their supply chains, Vietnam’s stability and strategic location make it an attractive and reliable alternative for semiconductor manufacturing and R&D.
Abundant Raw Materials: Vietnam boasts the world’s second-largest reserves of rare earth elements, which are crucial for semiconductor production, providing a long-term strategic advantage.

5. Challenges Hindering Vietnam’s IC Industry Growth

Despite the immense potential, Vietnam faces several key challenges:

Skilled Workforce Shortage: There is a significant gap between the demand for highly specialized semiconductor engineers and the current supply. Vietnam aims to train 50,000 engineers by 2030, but the current output is insufficient to meet this goal.
Infrastructure Limitations: The semiconductor industry requires highly reliable infrastructure, particularly a stable power supply. Even brief power outages can result in substantial losses for manufacturing facilities.
Technological Gaps: While strong in assembly and testing, Vietnam currently lacks advanced fabrication (fab) capabilities, which are essential for producing the most advanced chips.
Dependence on Foreign Investment: The industry is heavily reliant on FDI, and there is a need to foster the growth of domestic companies to create a more self-sufficient ecosystem.

6. Addressing These Challenges

Vietnam is proactively addressing these challenges through a coordinated approach:

Human Capital Development: The government, in collaboration with universities and private companies, has launched ambitious initiatives to train a new generation of semiconductor engineers. This includes establishing dedicated faculties, partnering with international universities, and creating alliances for research and training.
Infrastructure Investment: The government is prioritizing investments in energy infrastructure to ensure a stable and reliable power supply for high-tech industries.
Fostering Domestic Innovation: Initiatives are underway to support local companies like FPT Semiconductor and Viettel, encouraging their participation in the global supply chain and fostering a domestic innovation ecosystem.

7. Recent Initiatives and Concrete Plans (Real Actions on the Ground)

Vietnam’s ambitions are backed by concrete actions and a clear strategic vision:

National Strategy: The government has issued a national strategy for the development of the semiconductor industry until 2030, with a vision to 2050. This provides a clear roadmap for attracting investment, developing human resources, and building a comprehensive ecosystem.
Major Facility Openings: Amkor Technology’s new $1.6 billion factory in Bac Ninh and Hana Micron’s plant in Bac Giang are tangible evidence of Vietnam’s growing manufacturing capabilities.
Establishment of Design Centers: The planned design centers by Synopsys and Marvell in Ho Chi Minh City are set to become hubs for innovation and talent development in the IC design sector.
Public-Private Partnerships: The government is actively fostering collaboration between public institutions and private companies to accelerate research, development, and training in the semiconductor field. This includes the establishment of a semiconductor research and training alliance in Ho Chi Minh City.

Through these concerted efforts, Vietnam is not just participating in the global semiconductor industry but is actively shaping its future, with a clear focus on moving up the value chain and becoming a hub for both manufacturing and innovation.

Vietnam’s Semiconductor Ascent: From Assembly to Ambition