Vietnam has emerged as a prime contender as the US seeks a more diversified semiconductor supply chain, reducing dependence on China. DIGITIMES Research notes that relatively well-established semiconductor manufacturing supply chains are established in northern Vietnam, while IC designers have formed clusters in the south. The geographical distance between these regions may challenge the chip ecosystem to achieve optimal synergy in Vietnam.
DIGITIMES Research analyst and project manager Chou Yen observed that the semiconductor industry in Vietnam exhibits a clustering distribution, with the northern region specializing in memory ATMP, while the southern region focuses mainly on IC ATMP and design. However, there is no significant and extensive clustering from upstream to downstrem due to limitations in economies of scale, land transportation, internet policies, and other factors.
Chou highlighted that the IC design industry in southern Vietnam mainly comprises US-based companies like Semicon and Microchip, which can be traced, in part, to historical factors, as Ho Chi Minh City, formerly known as Saigon, exhibited a greater openness to Western culture before the unification of Vietnam.
Moreover, Ho Chi Minh City, the most populous city and a major economic hub in Vietnam, is a focal point for economic and consumption activities. In contrast, in the north, Hanoi serves as the political center. Consequently, IC designers focusing on applications strategically position themselves in southern Vietnam close to the vibrant market with significant economic and consumption activities.
Meanwhile, northern Vietnam became a memory manufacturing stronghold initially thanks to Samsung Electronics' decision to pick Vietnam as a major hub for handset manufacturing, and later thanks to the US-China geopolitical tension that led to a diversification trend, which benefits northern Vietnam as an emerging manufacturing hub, with Korea-based companies involved in memory, SSD assembly and testing, such as Hana Micron, expanding their investment in northern Vietnam. After 2016, a renewed wave of semiconductor investments began moving to Vietnam, including Amkor and Samsung's R&D center for semiconductors in Hanoi.
Semiconductor clusters in Taiwan thrive on the proximity of chip designers and manufacturers, fostering seamless communication. Conversely, Chou said that the transportation challenges between northern and southern Vietnam pose a potential communication barrier within chip ecosystems. Presently, air transport is the most convenient and predominant mode of business travel. Despite plans for constructing highways and high-speed railways, the extended timelines for completion, often exceeding 15 years, present logistical challenges. Fortunately, the burgeoning use of internet applications, coupled with the introduction of 5G services in Ho Chi Minh City in June 2020 and their subsequent availability in at least 18 provinces, indicates that digital communication methods could be a viable alternative.
According to Chou, a notable and apparent constraint lies in power supply, particularly given the energy-intensive nature of the semiconductor industry. Vietnam's power infrastructure is not as advanced as China's, necessitating swift improvements to align with the demands of the semiconductor sector.
In the past 1-2 years, the US has actively supported the semiconductor industries in Vietnam and India. Chou said that in the early stages, Vietnam and India may find themselves in potential competition. Thanks to the enormous market, much larger than Vietnam's, and various applications that may arise, semiconductor companies may be more interested in investing in India in the near future. On the other hand, those investing in Vietnam may have an eye on the broader Southeast Asian market and China. Chou said that due to their different and expansive market opportunities, Vietnam and India may attract investments in different ways. In the case of the US market, Chou believes that semiconductor investments in Vietnam and India may capture a portion of the US market.
Chip investments in Vietnam
Samsung Hanoi R&D Campus
Toshiba Software Development Vietnam
IC design, software development
Samsung Electro-Mechanics Vietnam
Amkor Technology Vietnam
Hana Micron Vietnam
Hana Micron Vietnam
Hangyang Digitech Vina
Source: DIGITIMES Research
About the analyst
Yen Chou received a master's degree from the Graduate Program for Political Economy at National Cheng Kung University. He worked as an assistant researcher at the Institute for Physical Planning and Information and as an analyst at DIGITIMES Research. His research focuses on Samsung's global investment and operation, the electronics industry in Vietnam, and the display industry in South Korea.