Awakening the semiconductor industry's potential

Despite a drop in demand in 2023, the worldwide semiconductor industry is expected to rise by more than 25% by 2024. According to SEMI SEA, the semiconductor industry for autos alone would exceed $300 billion by early 2030, accounting for more than 30% of total worldwide chip sales. This creates a big opportunity for potential countries like Vietnam.

Defining the steps for Vietnam

In actuality, Vietnam has a lot of promise in the semiconductor business. Aside from a stable economic climate, the country boasts an abundance of key metal deposits for semiconductor fabrication. In addition, the government is aggressively enacting advantageous regulations to encourage international investment in this industry.

Many analysts feel that, while Vietnam has a strategy for attracting investment and expanding the chip sector, there is no clear plan in place for the country's position in the global supply chain.

Virginia B.Foote, CEO of Bay Global Strategies and Vice Chairman of AmCham Hanoi, asserts that becoming a global player in the semiconductor industry from a low starting point is not an instant achievement. This industry requires substantial investment and extensive training. Foote believes that with the right interest and planning, there is no reason Vietnam cannot progress in the supply chain.

According to researcher Steve Blank, seven distinct types of enterprises representing certain industry segments are required to participate in the global semiconductor supply chain, ranging from core IP designers to companies specialized in chip casting or packaging.

For example, just over 150 businesses globally sell chip IP throughout the design process. Meanwhile, three US suppliers dominate the Electronic Design Automation (EDA) stage: Cadence, Mentor (now part of Siemens), and Synopsys.

Chip designs are then transmitted to chip production companies where they are turned into physical goods. At this point, the factories must also acquire machinery, raw materials, and specialized chemicals, all of which are expensive.

This is a complicated process involving hundreds of individual procedures performed by many organizations throughout the world, which are often reduced into three well-known processes (design - manufacture - assembly, packing, and testing).

Tran Ha My, Key Account Manager at FPT Software Europe and a member of the AVSE Global, feels that with the correct investment plan and mobilization of resources both locally and globally, Vietnam has the potential to become a big chip casting hub.

Overcoming significant obstacles

Large state-owned and commercial firms like as TSMC (Taiwan), ASML (Netherlands), SMIC (China), and Samsung (South Korea) are among the world's semiconductor powerhouses. In contrast, due to a lack of finance and technological secrets, Vietnam lacks such significant names in the semiconductor business.

To overcome this issue, Tran Ha My advises that Vietnam focus on expediting R&D or forming strategic alliances with worldwide semiconductor R&D institutions.

Furthermore, Vietnam's investor attraction strategies are unclear and inconsistent among areas. According to Tran Ha My, other areas still lack clear strategies to encourage foreign firms to invest, despite Ho Chi Minh City having a relatively thorough strategy linked with the global semiconductor industry's speed of growth. Local governments must address this issue as soon as possible.

Furthermore, Virginia Foote highlights other challenges that Vietnam must overcome when participating in the global semiconductor supply chain, including energy, labor, and long-term strategy. In terms of energy, especially renewable energy, it will be a factor that U.S. companies consider when deciding whether Vietnam is a suitable destination for semiconductor investment. Despite having a large number of engineers, Vietnam's high-quality workforce is not concentrated in the semiconductor field. Therefore, Vietnam urgently needs to train and develop this workforce. In the long term, Virginia Foote suggests that Vietnam's policymakers should identify a specific sector within the semiconductor industry to mobilize resources.

"There are many input suppliers, many cross-border products at various points in the semiconductor supply chain. Therefore, Vietnam needs to review the entire supply chain and companies in Vietnam; then work with each global company to find where Vietnam can participate in the supply chain. It may start from a lower level and then progress", said Virginia Foote.