Vietnam’s Semiconductor Industry: Current Status and Future Challenges

The semiconductor sector globally reached a valuation of $500 billion in 66 years, but it is projected to hit $1 trillion within just nine more years, showcasing remarkable growth. However, in Vietnam, the semiconductor market is predominantly influenced by foreign investments, with limited local ownership.

During a seminar on Vietnam’s semiconductor landscape held in Hanoi on November 29, Nguyen Thanh Yen, CEO of CoAsia SEMI, presented noteworthy insights. In 2021, over 1 trillion chips were sold globally, which translates to roughly 120 chips for every individual on the planet each year.

“It’s increasingly rare to find a device that lacks a chip,” Yen stated, pointing out how integral microchips have become in everyday technology.

Yen referenced a chart from Dr. Nguyen Thi Bich Yen, a prominent figure in the semiconductor industry, illustrating how it took 66 years to reach a $500 billion market size in 2021, yet only nine years will be needed for the market to reach the $1 trillion mark by 2030.

According to Yen, the initial boost in this growth was propelled by innovations in computers, mobile devices, and technology like 4G/5G. Future advancements such as self-driving cars, AI, and 6G promise to further elevate the industry.

The iPhone chip production process exemplifies global semiconductor supply chain dynamics, involving inputs from nations such as the Netherlands (equipment), the UK (intellectual property), the US (design), and Taiwan (manufacturing), while basic materials are sourced from China and Japan, with assembly done in countries like Malaysia and China.

This complex structure highlights Asia’s pivotal role in semiconductor manufacturing, positioning the region as key in shaping the industry’s future.

When discussing Vietnam’s semiconductor potential, Yen referred to research by Dr. Nguyen Thi Bich Yen that identified challenges anticipated over the next three years, including a scarcity of skilled workers, disruptions in the supply chain, escalating R&D expenses, cybersecurity threats, and limited production capabilities.

“While the global market is dealing with a talent gap, Vietnam boasts a young, eager workforce,” Yen noted, emphasizing the advantage of having around 500,000 university graduates annually and solid labor export programs. “However, this chance might pass if we don’t take action soon.”

Vietnam currently has roughly 50 companies focused on chip design, seven facilities for packaging and testing, and no manufacturing operations. The sector contributes almost $20 billion yearly and employs about 26,000 engineers. Nonetheless, there are considerable gaps to fulfill the government’s semiconductor strategy for 2030, which envisions 100 chip design companies, one manufacturing plant, 10 packaging facilities, and 50,000 skilled personnel.

Despite the potential, Vietnam’s semiconductor industry encounters three main hurdles:

1. **Incomplete Ecosystem**: There is a lack of a comprehensive ecosystem in Vietnam that includes design, manufacturing, testing, and packaging. Yen pointed out that foreign companies dominate the growing consumer electronics market, leaving minimal ground for local enterprises.

2. **Policy Implementation**: While Vietnam has well-crafted semiconductor policies, their execution often lacks efficiency. Yen mentioned delays in clearing customs for imported electronic samples as a key bureaucratic issue.

3. **Lack of Ownership**: The country’s 50 chip design companies and seven packaging facilities are all foreign-owned. “These foreign companies can exit anytime,” Yen cautioned, in contrast to South Korea and Taiwan, which have cultivated strong domestic companies like Samsung and TSMC.

Vietnam now faces a crucial choice: either traffic in FDI-centric strategies like those of Malaysia and Indonesia or aspire to develop its own semiconductor leaders, akin to its advanced neighbors.

Vietnam recently announced its Semiconductor Industry Development Strategy, with ambitious targets for 2030, 2040, and 2050:

• **By 2030**: Aim for 100 chip design companies, one manufacturing plant, ten packaging facilities, and 50,000 workers.
• **By 2040**: Reach 200 chip design companies, two manufacturing plants, fifteen packaging facilities, and 100,000 workers.
• **By 2050**: Establish 300 chip design companies, three manufacturing plants, twenty packaging facilities, and a self-sufficient ecosystem.

The future success of Vietnam’s semiconductor industry will ultimately hinge on its ability to navigate these challenges and capitalize on fleeting opportunities in the coming years.