A big boost for Vietnam’s semiconductor industry

Prime Minister Pham Minh Chinh had a discussion with Nvidia President and CEO Jensen Huang.

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In September 2023, US President Joe Biden paid a visit to Vietnam. During the trip, he committed to help Vietnam expand its semiconductor capabilities and train its workforce. As a first step, the United States agreed to promote the growth of Vietnam's semiconductor ecosystem by funding $2 million for the country's semiconductor workforce. The US government has allocated $100 million per year for five years under the CHIPS Act, which was enacted in 2022, to promote global semiconductor supply chains. A portion of it might go to Vietnam.

After the trip, Vietnam and the United States agreed to elevate their ties to a comprehensive strategic partnership. The improved relations, along with the fact that the United States is leading the trend of diversifying the supply chain to prevent dangers associated with China, are projected to be a driving factor for Vietnam's semiconductor sector.

Vietnam currently has preferential policies for the high-tech sector, such as a 15-year land rent exemption for investments in high-tech zones, as well as import and export tax exemptions for raw materials, supplies, and components that are not produced domestically for project production.

Vietnam is developing its semiconductor industry development strategy till 2030. The strategy will provide a vision, confirm Vietnam's resolve, goals, roadmap, solution tasks, and specific preferential policies to promote the development of the electronics sector in general and the semiconductor industry in particular. The primary goal is to promote Vietnam's involvement in the regional semiconductor ecosystem by recruiting global semiconductor companies to present, produce, research, and develop in Vietnam.

Furthermore, the government has directed the Ministry of Planning and Investment (MPI) to draft a strategy to develop semiconductor human resources until 2030, with the objective of teaching 50,000 engineers, 1,000 masters, and 100 PhDs in the semiconductor business by then. MPI is presently cooperating with domestic schools to carry out this approach. MPI has also struck a collaboration deal with the University of Arizona, the biggest training facility in the United States semiconductor sector for.

In addition, Vietnam's National Assembly directed the government to draft a Decree to create an investment assistance fund (hence referred to as the Fund), with an initial concentration on high-tech industries such as the semiconductor industry. According to the draft regulation, the Fund would assist high-tech firms with input expenditures like training, R&D, equipment investment, and manufacturing.

Nguyen Thuy Nga, analyst at VNDirect, believes that with the government's efforts to promote the country's semiconductor industry and the increasing diversification of the global semiconductor supply chain, the Vietnam semiconductor industry will grow strongly in the coming years and has the potential to become an assembly, testing, and packaging hub with the following benefits.

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First, Vietnam has cheaper labor and construction expenses than most other nations in the area, behind only India and Indonesia.

Second, Vietnam has a desirable geographical location that allows easy access to major global commercial marine routes. Vietnam is situated near the East Sea, a critical trading route on the world maritime map. One of the world's ten major rivers passes through Vietnam, while four more channels connect the nation. Furthermore, being a country next to China, Vietnam is the top choice in Southeast Asia for foreign investors following a China1 strategy.

Third, Vietnam is still in its golden population phase, with the workforce participation rate expected to reach 68.5% in 2022. Vietnam has a large work force, placing it only behind India and Indonesia with 56 million people.

However, the semiconductor industry has a skilled worker shortage. Vietnam has roughly 5,500 people developing circuits, but most of them are physical designers, with only a few structural design engineers, who require substantial skill. Microchips and semiconductors are not new academic subjects in Vietnam, but the industry's talent pool is limit   ed. The cause is partly due to low input demand, since knowledge of job options in the semiconductor sector remains low, and schools have hitherto not prioritized investment in the semiconductor industry's education system.

The growing presence of semiconductor industry giants such as Amkor and Hana Micron, combined with the Government's policy of promoting semiconductor human resource training and focusing on investing in the semiconductor industry from schools such as FPT, would help Vietnam quickly alleviate the shortage of human resources for this industry, allowing Vietnam to seize the opportunity to become a new semiconductor ATP hub globally.

"We anticipate that FPT and DGC will profit as the global semiconductor sector shifts to a new long-term growth trajectory. Furthermore, with the need for high-quality human resources in the semiconductor sector projected to skyrocket in the next few years, we feel that technological education firms such as FPT will be the primary winners," Nga stated.