Vietnam Wants To Increase Investment In Chip Industry

Illustration of chip packaging in Vietnam. (photo: dock.pexs)

JAKARTA - Two business executives have stated that Vietnam is in talks with chip companies with the aim of increasing investment in the country. They are likely to build their first chip factory despite warnings from US industry officials about high costs.

The Southeast Asian electronics manufacturing center already hosts the largest US-giant semiconductor testing and packaging plant, Intel, worldwide. Vietnam is also home to several chip design software companies. Vietnam is working on a strategy to attract further semiconductor investment, including from the foundry, which focuses on chip manufacturing.

"Meetings with half a dozen US chip companies have occurred in recent weeks, including with Fab operators," said Vu Tu Thanh, head of Vietnam's office from the US-ASEAN Business Council, as quoted by VOI from Reuters. But he declined to mention the companies because talks were still at an early stage.

A chip executive, who was reluctant to be identified for not being allowed to speak to the media, said talks with potential investors involved US contract manufacturers GlobalFoundries and PSMCs from Taiwan.

"The goal is to build Vietnam's first fab, most likely for less sophisticated chips used in cars or for telecommunications applications," the executive added.

The meetings followed a historical increase in formal relations between Vietnam and the US in September, when President Joe Biden visited Hanoi and the White House describing the former enemy as a potential "critical player" in the semiconductor global supply chain.

GlobalFoundries attended a limited business meeting during Biden's visit after an invitation from the president himself, the company said, but has since shown no immediate interest in investing in Vietnam, said someone familiar with the matter.

"We don't comment on market rumors," a GlobalFoundries spokesperson said when asked about the next contacts. While PSMC did not provide a response to requests for comment.

Industry officials in Vietnam said that the meeting at this stage was mostly to test interest and discuss potential incentives and subsidies, including electricity supply, infrastructure, and the availability of trained workers.

The Vietnamese government has said it wants to establish their first fab towards the end of the decade and on Monday, October 30 said chip companies would get "the highest incentives available in Vietnam".

According to Hung Nguyen, senior program managers in supply chains at the University of Vietnam, they may also support local companies such as state-owned technology company Viettel to build fabs with imported equipment. Viettel himself did not respond to requests for comment.

However, Robert Li, US Vice President of Synopsys, a leading chip design company operating in Vietnam, urged the government to "thinking twice" before providing subsidies to build fabs.

Speaking at "Vietnam Semiconductor Summit" in Hanoi on Sunday, he said that building a foundry could cost up to 50 billion US dollars (Rp793 trillion), and would involve competition in subsidies with China, the US, South Korea and the European Union, each of which announced plans to spend on chips between 50 and 150 billion US dollars.

John Neuffer, President of the US Semiconductor Industry Association, at the same conference, recommended the government to focus on the chip sector where Vietnam is already strong, such as assembling, packing, and testing.