The United States plans to invest in Vietnam‘s semiconductor industry to achieve supply chain diversification

Source: Xinzhixun

    On February 1st, according to Nikkei Shimbun, US Deputy Secretary of State for Economic Growth Jose Fernandez recently announced that the US will invest in Vietnam‘s semiconductor industry under the Chip and Science Act to achieve supply chain diversification and reduce dependence on China.

    According to the US Chip and Science Act, the US government will provide $100 million annually for five years to support the global semiconductor supply chain, aimed at strengthening semiconductor training, cybersecurity, and business environments in seven target countries, including Vietnam.

    Fernandez said, "We have compiled a list of countries that we believe may benefit from our ‘chip bill‘ support, and Vietnam is one of the first countries we consider."

    Although Vietnam does not have chip manufacturing capabilities and chip design is very weak, it is currently vigorously developing the semiconductor industry, and there are also many electronic assembly companies in Vietnam, so there is also a great demand for chips. With the support of the United States, the semiconductor industry is also developing rapidly.

    Intel owns a $1.5 billion semiconductor factory in southern Vietnam for assembling, packaging, and testing chips, which is the largest factory in its global network. Intel also plans to further expand the packaging and testing plant;

    In May 2023, American chip design company Marvell announced the establishment of a chip research and development center in Ho Chi Minh City, Vietnam by upgrading its subsidiary. Together with research and development centers in the United States, India, and Israel, Marvell Group will become one of the four global research and development centers.

    American semiconductor packaging and testing giant Amkor has invested $1.6 billion to build a state-of-the-art large-scale semiconductor packaging and testing factory near Hanoi, Vietnam, which began operations in October 2023;

    The US EDA and semiconductor IP giant Synopsys will also collaborate with the Saigon High tech Park located in Ho Chi Minh City to launch a semiconductor design and incubation center.

    In November 2023, Dutch semiconductor equipment manufacturer Besi announced plans to relocate some of its Chinese business to Vietnam. Henk Jan Poerink, Vice President responsible for Besi‘s global operations, stated at the time that Besi had been approved to rent a factory in southern Vietnam with an initial investment of nearly $5 million. Future investment will significantly increase, with plans to build factories in Vietnam within four years.

    Fernandez believes that over time, Vietnam can develop its semiconductor capabilities.

    Fernandez also emphasized the potential of Vietnam as a hub for the electronics manufacturing industry, such as HP moving its personal computer assembly to Vietnam, Mexico, and Thailand. He also pointed out that Vietnam‘s abundant young labor force is an important asset. He encourages taking advantage of this, as it may not be a permanent opportunity.

    Data shows that currently, electronic supply chain manufacturers including Hon Hai, Samsung Electronics, Canon, Lixun Precision, Longqi, Shunyu, Guanghong Technology, Lixun Precision, Lansi Technology, Lingyi Zhizao, Goer Corporation, Shuo Beide and others have set up factories in Vietnam. In July 2023, electronic foundry Guangda also announced that its Vietnamese subsidiary plans to invest 514.962 billion Vietnamese dong (approximately RMB 155 million) to build a QMH F1 factory in Vietnam. Initially, the focus will be on expanding laptop production capacity, and later adjustments will be made based on the group‘s global layout and related needs.

    In addition, Vietnam has a large reserve of rare earth metals. According to a geological exploration report from the United States, Vietnam has approximately 22 million tons of rare earth reserves, second only to China and ranking second in the world. The United States believes that this will play a crucial role in the strategy to counter China‘s dominant position in the rare earth market. At present, the United States is mainly rebuilding its position in the rare earth metal market by restoring its own mines and providing support for Vietnam‘s exploration of its mineral deposits.

    Fernandez stated that Vietnam urgently needs to attract investment in key industries such as clean energy and minerals that are crucial for electric vehicles and batteries. This measure is consistent with Vietnam‘s efforts to be designated as a market economy country by the United States, which will lead to tariff reductions and ultimately investment. However, the challenges currently faced in obtaining permission from the Vietnamese government (US companies have attempted to collaborate with Vietnamese rare earth companies in the past but have not been successful) have hindered potential US investments, which could reach up to $8 billion, including investments from chip companies committed to using only clean energy.

    The United States will make foreign aid decisions based on the recommendations of the Organization for Economic Cooperation and Development (OECD) and the Chip and Science Act. These suggestions will be submitted in February 2024, with a focus on identifying the conditions necessary for Vietnam‘s development of the semiconductor industry, especially in areas such as training.

    It is worth noting that as early as September 2023, during his visit to Vietnam, General Biden announced the establishment of a new semiconductor partnership between the United States and Vietnam, strengthening cooperation and supply chain support in the semiconductor, AI, and rare earth fields. At that time, Biden also led executives from top US semiconductor companies, including Intel, GlobalFoundries, Amkor, Marvell, Boeing, and Google, as well as other technology companies, to attend a business conference held in Hanoi, and confirmed that the United States planned to enhance Vietnam‘s global role in chip manufacturing and other different manufacturing sectors, This is also part of a broader strategy for the United States to strengthen the supply chain threats faced by related industries such as semiconductors.