In their joint announcement on the U.S.-Vietnam Comprehensive Strategic Partnership, the two countries highlighted Vietnam’s considerable potential to become a key nation in the semiconductor industry and “support the rapid growth of semiconductor ecosystem in Vietnam”.
The announcement also mentions initiatives to develop human resources in the semiconductor industry, with the United States initially providing a $2 million seed fund and investments from the Vietnamese government and industry private in the future.
These are seen as another step by Vietnam in its journey to join an industry worth hundreds of billions of dollars that touches every area of the world.
According to February data from the US Census Bureau, chip imports from Vietnam jumped 75% during the month to $562.5 million, up from $321.7 million a year earlier, to account for a market share of 11.6%.
This impressive figure places Vietnam first in Asia in terms of growth, according to Bloomberg.
But experts stressed that Vietnam’s contribution remains minor when considering the entire supply chain.
There are three fundamental aspects of chip manufacturing: design, foundry and packaging.
The Intel factory in Ho Chi Minh City being its main producer, Vietnam only participates in the last phase before the chip enters the market.
It is also the lowest value phase of the supply chain. According to the Semiconductor Industry Association (SIA), packaging accounts for 6% of the value of a chip.
“Vietnam currently plays a key role in the global semiconductor field, but its main focuses are assembly, testing and packaging,” said analyst Ivan Lam of Counterpoint Research. VnExpress.
Ups and downs in the semiconductor industry
Vietnam does not have the capacity to manufacture semiconductors locally, he said.
Vietnam once had a component factory. The Z181 semiconductor foundry was built in 1979 and produced and exported diodes and transistors.
Industry insiders consider this to be the genesis of Vietnam’s semiconductor industry. But the factory stopped production in the 1990s.
In 2004-2005, foreign companies like RVC and Active Semi established design centers and the Integrated Circuit Design Research and Education Center was established in Vietnam.
A year later, Intel invested in Vietnam, built a factory in the Saigon Hi-Tech park and established itself in the packaging phase.
After a period of dizzying growth, the chip industry was wiped out by the 2008 Great Recession.
After a recovery in 2013-2014, local companies such as Viettel and FPT began to enter the sector.
Vietnam now has more than 5,500 chip design engineers, according to the Vietnam Microchip Community.
Intel’s Ho Chi Minh City factory has already shipped more than three billion chips.
An ecosystem is gradually being established in the American giant’s supply chain.
South Korean chip design companies are following in Samsung’s footsteps and expanding into Vietnam, including CoAsia in Hanoi and Amkor in Bac Ninh province.
Kim Huat Ooi, general manager of Intel Products Vietnam, said: “We should not underestimate the role of packaging and inspection. Compared to the last generation, the production of new processing chips is much more sophisticated. »
Entering a $500 Billion Industry
According to the Semiconductor Industry Association, the global chip market was worth $556 billion last year.
More importantly, chips are everywhere, from computers to rockets to washing machines, and are the driving force behind an international manufacturing sector worth tens of billions of dollars.
The colossal potential of the semiconductor industry makes it an attractive target for nations. But the complexity of chip manufacturing means that virtually no country can produce a semiconductor chip itself.
An integrated circuit (IC) is about one inch square but contains millions or even billions of transistors.
Manufacturing such a product takes the manufacturer four to six months and involves more than 500 separate steps from design on dedicated software to creation and assembly in foundries and testing in specialized facilities.
Consulting firm Accenture estimates that the components needed to create a chip travel around 70 times between countries before the finished product reaches the end user.
This is seen as an opportunity for new markets like Vietnam to join the global supply chain.
But this multi-billion dollar industry remains a bridge too many since the country only has 5,000 engineers.
Vietnam has two options to develop: develop the production sector or improve skills and value in the design and packaging phase.
According to experts, Vietnam opts for the latter option.
In a meeting with two national universities on September 6, Minister of Information and Communications Nguyen Manh Hung said Vietnam has advantages in chip design and will prioritize it.
The most important infrastructure for this, and the one that requires government investment, is a chain of cutting-edge research facilities, he added.
Nguyen Thanh Yen, administrator of the Vietnam Microchip Community, said he had been observing the Vietnamese semiconductor market for 20 years and developing design expertise was the way forward.
“Five thousand engineers is neither a large number nor a small number, and they play an important role in training the next generations of engineers.
“In the chip industry, design engineers are the most crucial because they know every part of the design. If Vietnam focuses on developing engineers, we will achieve great results in the next five to ten years. “
At the Vietnam-US Innovation and Investment Summit on September 11, Truong Gia Binh, chairman of FPT Corporation, urged the government to invest in training 30,000 to 50,000 semiconductor experts.
FPT University has announced the establishment of a semiconductor and circuits department to address the shortage of highly skilled workers in the country.
It will welcome its first students in 2024 and will offer them comprehensive training in integrated circuit design and conduct research on semiconductors.
Vietnamese companies can adopt a fabless manufacturing model like Nvidia, ARM and Qualcomm, designing chips and conducting business but not manufacturing them.
FPT Semiconductor does it in Vietnam.
The production process will require huge investments since the country barely has the necessary ecosystem.
Experts say the shortage of personnel poses an obstacle to Vietnam’s ambitions to increase the value of its chip supply chain.
Also at the Sept. 6 meeting with universities, Hung said the semiconductor industry would need 10,000 engineers per year, but the current rate is less than 20 percent of that figure.
In fact, the number of engineers is only growing by about 500 per year, according to a report from the Vietnam Microchip Community.
Most Vietnamese semiconductor engineers currently work for foreign companies.
They include highly qualified people, but usually in a certain phase or specific process, and few at the chief engineer level, Yen said.
“Our position now is that of a supplier of people who can manage a particular stage of the chip design process and not finalize designs or bring chips to market.”
Additionally, the industry is typically “conservative” and prioritizes experience, he said.
In computing, faulty software can be quickly changed and fixed, but repairing faulty chips can cost millions of dollars and years, he said.
So new engineering graduates are usually not given key tasks, he explained.
“The labor shortage is not due to a lack of new recruits, but because companies have not yet found a way to utilize new graduates.”
Experts also called on the government to offer income tax breaks to attract Vietnamese specialists working abroad.
Over the next five to seven years, Vietnam will need local fabless chipmakers with a strong market base, they said.
Ivan Lam, an analyst at Counterpoint Research, said Vietnam lags behind other Asian countries like Singapore and Malaysia, although companies like Viettel and FPT have developed their own R&D and chipsets.
“Consistent investments in education, industry support, international cooperation and the accumulation of intellectual property are essential to overcoming this obstacle.
“Thanks to the government’s efforts, the participation of local companies and the cooperation of global chipmakers, the country’s semiconductor industry has long-term growth potential.”