Newly-Rising Semiconductor Manufacturing Industry In Vietnam: The General Landscape

In the vibrant economic landscape of Southeast Asia, Vietnam is carving out a distinct niche with its burgeoning semiconductor manufacturing industry. 

As global leaders like Hanmi Semiconductor and Infineon Technologies AG set up operations in the country, Vietnam is witnessing a transformative wave in the realm of semiconductor manufacturing. This pivotal shift not only positions Vietnam as a key player in the global market but also underscores its potential to become a sought-after hub for cutting-edge technologies. 

Let’s delve into the dynamic terrain of the semiconductor market in Vietnam and explore the unfolding opportunities and challenges.

Vietnam’s Quick Economic Growth

Vietnam is rapidly emerging as a pivotal player in the global semiconductor manufacturing market, attracting major investments from renowned manufacturers. Notably, South Korea’s Hanmi Semiconductor officially launched its branch in the northern province of Bắc Ninh in May, recognizing Vietnam’s potential as a semiconductor production hub. CEO Kwak Dong-shin expressed confidence in Vietnam’s rising status, affirming its appeal to semiconductor manufacturers.

In June 2023, Germany’s Infineon Technologies AG, a semiconductor solutions giant, announced an expansion in Vietnam and the establishment of a chip development team in Hà Nội.

With a burgeoning population of around 100 million, Vietnam is increasingly viewed as a key market for multinational collaborations seeking technical talents. Market research estimates a compound annual growth rate of 6.12% for the semiconductor manufacturing market in Vietnam between 2022-2027, with a forecasted increase of $1.65 billion.

The growing demand for smartphones and the emerging trend of smart homes are identified as key drivers for market growth. Despite the positive trajectory, a significant challenge lies in the scarcity of skilled labor, hindering further expansion.

Remarkable FDI’s Surge in Vietnam’s Semiconductor Manufacturing Industry

Some Remarkable Figures

Vietnam’s semiconductor industry is experiencing a remarkable surge in Foreign Direct Investment (FDI), with global manufacturers recognizing the nation’s potential. The Bank of Korea’s recent report highlights Vietnam’s ascent as a crucial market for South Korean semiconductor manufacturing makers, especially amid a slowdown in chip demand in China.

Vietnam’s chip industry has demonstrated substantial growth, evident in the 74.9% increase in revenue from exporting semiconductor chips to the US within a 12-month period. Accounting for 10% of such exports to the US, Vietnam stands as the third-largest contributor after Malaysia and Taiwan, solidifying its position in the global semiconductor manufacturing market.

Reasons Behind Such Growing Factors

The country’s abundant low-wage workforce, combined with its strategic proximity to the Chinese market, is prompting international businesses, including those from South Korea, to establish manufacturing facilities in Vietnam. Major smartphone manufacturers have set up production bases in the country, utilizing Korean semiconductors as intermediary goods.

Navigating the Vietnamese Semiconductor Manufacturing Landscape: Opportunities and Threats

Opportunities

1. Semiconductor Manufacturing Technology’s Growth

The influx of Foreign Direct Investment is a pivotal driver propelling Vietnam’s semiconductor manufacturing sector. Global leaders like Hanmi Semiconductor from South Korea and Infineon Technologies AG from Germany have made significant investments, underscoring Vietnam’s appeal as a prime production hub. This surge in FDI not only injects capital but also brings in advanced technologies and expertise, fostering a conducive environment for the industry’s growth.

2. Global Value Chain Integration

Vietnam’s strategic positioning in the global value chain is a significant opportunity for semiconductor manufacturers. The country has become a major production base for IT devices, making it an attractive alternative amid geopolitical uncertainties such as the US-China trade dispute. This integration into the global value chain enhances Vietnam’s competitiveness and presents opportunities for further collaboration with international partners.

3. Economic Transformation and GDP Growth

The semiconductor industry offers Vietnam a pathway to transition from a labor-intensive economic model to one powered by advanced technology. Experts suggest that embracing semiconductor manufacturing could help Vietnam achieve its ambition of attaining a GDP per capita exceeding $18,000 by 2045. This transformation not only aligns with global technological trends but also positions Vietnam as a key player in the evolving landscape of semiconductor innovation.

Threats

1. Skilled Labor Shortage

One of the primary threats facing the Vietnamese semiconductor manufacturing landscape is the shortage of skilled labor. While the demand for semiconductor production is on the rise, the industry is hindered by a lack of professionals with the necessary skills and training. This shortage poses a significant challenge to meeting the increasing demand for skilled workers in the sector.

2. Policy Framework and Training Gaps

To fully capitalize on the opportunities in semiconductor manufacturing, Vietnam must address gaps in its policy framework and strengthen vocational training in the high-tech sector. The lack of a robust policy environment and adequate training programs could impede the industry’s growth potential.

3. Dependency on External Factors

The Vietnamese semiconductor industry’s growth is influenced by external factors such as global economic conditions, geopolitical tensions, and supply chain disruptions. Dependence on these external elements makes the industry vulnerable to sudden shifts, potentially impacting production and market stability.

4. Competition from Established Players

As Vietnam solidifies its position in semiconductor manufacturing, it faces stiff competition from established players in the global market. Competing with countries like Taiwan and Malaysia, which have a longstanding presence in the semiconductor industry, requires Vietnam to continuously enhance its factory infrastructure, regulatory environment, and innovation capabilities.

Vietnam stands at the crossroads of unprecedented growth in semiconductor manufacturing. The opportunities presented by FDI, market demand, global value chain integration, and economic transformation are substantial. 

However, addressing the looming threats of a skilled labor shortage and refining the policy framework are imperative to sustain and maximize the potential of the semiconductor manufacturing landscape in Vietnam. As the nation navigates these challenges, it is poised to cement its position as a key player in the global semiconductor arena.

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Data retrieved from: Vietnamnews