Vietnam explores chip industry expansion despite high costs

Vietnam is currently in discussions with major chip companies to boost investments in the country, potentially leading to the establishment of its first semiconductor manufacturing plant, despite concerns raised by U.S. industry officials regarding the associated high costs.

The Southeast Asian nation, already recognized as an electronics manufacturing hub, plays host to Intel's largest semiconductor packaging and testing facility worldwide. Additionally, Vietnam is home to various chip design software firms, setting the stage for its aspirations to attract more semiconductor investments, especially from foundries that focus on chip manufacturing.

According to business executives, meetings with six U.S. chip firms, including those involved in fab operations, have transpired in recent weeks. Vu Tu Thanh, the head of the Vietnam office of the US-ASEAN Business Council, confirmed these discussions, although he refrained from naming the companies, citing the preliminary nature of the talks.

An anonymous chip industry executive disclosed that these discussions included talks with potential investors such as U.S. contract manufacturer GlobalFoundries and Taiwan's PSMC. Their shared objective is to establish Vietnam's inaugural fab, likely specializing in the production of less advanced chips suitable for use in automobiles or telecommunications applications.

The initiation of these meetings follows a historic upgrade of formal relations between Vietnam and the U.S. in September 2023. During U.S. President Joe Biden's visit to Hanoi, the White House identified Vietnam as a "critical player" in global semiconductor supply chains.

While GlobalFoundries attended a restricted business summit during Biden's visit upon his personal invitation, the company has not indicated immediate interest in investing in Vietnam. When questioned about subsequent communications, a GlobalFoundries spokesperson stated, "We do not comment on market rumors."

Industry insiders assert that these meetings, at this stage, serve primarily as an exploration of interest and an avenue for discussions about potential incentives and subsidies, which may encompass aspects such as power supplies, infrastructure, and the availability of a skilled workforce.

The Vietnamese government has expressed its desire to establish its first fab by the end of this decade, emphasizing that chip companies will benefit from "the highest incentives available in Vietnam."

Vietnamese state-owned tech company Viettel may also receive support to build fabs with imported equipment, as per Hung Nguyen, senior program manager on supply chains at Hanoi's University Vietnam.

However, industry experts, including Robert Li, Vice President of U.S. Synopsys, a leading chip design firm with operations in Vietnam, have urged the government to carefully consider the implications of offering subsidies to construct fabs. Speaking at the "Vietnam Semiconductor Summit" in Hanoi, Li emphasized that establishing a foundry could cost as much as $50 billion and necessitate competing for subsidies with global players such as China, the U.S., South Korea, and the European Union, each of which has announced substantial spending plans on chips ranging from $50 billion to $150 billion.

John Neuffer, President of the U.S. Semiconductor Industry Association, echoed these sentiments at the same conference, suggesting that the government should focus on areas where Vietnam already possesses strength in the chip industry, such as assembly, packaging, and testing.