• March 23, 2023
vietnam first semiconductor chips 2022
 
As Vietnam’s economy grows and the country strives to move up the value chain, the government has promoted the electronics and semiconductor industries to assist it in meeting these objectives.
 
Vietnam’s electronic sector has risen dramatically, and the country now ranks as a main electronic exporter, up from 47 in 2001 to 12 in 2019. It is becoming a global hub for electronic manufacturing.
 
Smartphone shipments ranked second worldwide in 2019, with a total value of more than $50 billion. The key reasons for this were lower labour costs and more appealing policy incentives in comparison to other regional countries. These characteristics, together with Vietnam’s favourable demographics, have aided the expansion of the electronics and semiconductor industries in the country.
 
Samsung and Intel were among the first to invest in Southern Vietnam. This was followed by investments in the country’s north, such as Bac Ninh and Thai Nguyen provinces, by other businesses such as LG, Canon, and Panasonic.
 
Telecommunications are the most important component of the electronic industry, followed by subassemblies. Phones account for half of all electronics-related exports. Computers, storage devices, and consumer electronics are also important groups.
 
The electronics component group is dominated by Intel, which has been producing chips in Ho Chi Minh City since 2010.
 

Vietnam semiconductor industry

Vietnam’s semiconductor industry is expected to reach US$6 billion by 2021, but it is still lagging behind other Southeast Asian countries due to limited IC fabrication supply. While IC fabrication is still in its early stages, the design side is well developed, with approximately 20 companies providing product design services.
 
Businesses that invest in the semiconductor industry are eligible for preferential incentives such as zero percent corporate income tax for the first four years, followed by 5% for the next nine years, and 10% for the next fifteen years, as compared to the usual rate of 20%. Furthermore, industrial parks will subsidise 10 to 15% of training expenditures for semiconductor companies.
 
Foreign players dominate the industry. Intel is the market leader, although others include Juki, Renesas, and Esilicon. Among the local players are Saigon Semiconductor Technology, Viet Vmicro Electronics, and VSMC.
 

Vietnam local value chain

Upstream activities in Vietnam are limited. The design is done in another country, and the essential components, such as electrical chips, are imported from there. Only a few companies perform research and development in Vietnam. Only in midstream does Vietnam have an advantage, and the industry is growing. Indeed, with the lowest value add in the value chain, local companies focus on assembly on finished products and subassemblies for export. Because local companies lack marketing capabilities and capital, downstream activities are carried out outside of Vietnam.
 
Vietnam, on the other hand, has made enormous efforts to encourage commerce and develop its free trade network. Several electronic devices will be tax exempt under several of the FTAs signed and implemented by Vietnam in recent years. As a result, the market for Vietnam’s electronics exporting destination countries will rise, as will the industry for telephone and computer components, computers, and electronic components.
 
To reap the benefits, Vietnam will need to integrate into the value chain and move beyond being a low-cost manufacturer.
Companies in Vietnam can be classified into three types based on their competitive landscape: global lead firms, contract manufacturers, and platform leaders.
 
Global lead firms coordinate with global value chains and retain the majority of the added value and profits. Multinational corporations such as Samsung, LG, Canon, and Panasonic are examples.
 
Contract manufacturers are key players who focus on manufacturing for a variety of global leaders. Foxconn, Jabil, and Compal are a few examples.
Platform leaders are businesses that have cutting-edge technologies (software, hardware, or both) that are widely used by other businesses. Intel is the dominant player in this space.
 
There are also a number of companies in the local supply chain that provide parts and subcomponents to the three groups. Hundreds of foreign-invested firms, primarily from South Korea and Japan, are among them. In Vietnam, such businesses are concentrated in the north, with Hanoi and Hai Phong as preferred locations.
 

The future of the industry in Vietnam

Vietnam did not produce anything significant until 2007, but it is now one of the world’s top electronic exporters. The sector is led by a few large multinational corporations, the most notable of which is Samsung, and is primarily reliant on imported components due to limited domestic production.
 
However, ongoing foreign investment and the adoption of Industry 4.0 technology are expanding opportunities for high-tech manufacturing in the short to medium term. As a result, now is an excellent time for entrepreneurs to seriously consider Vietnam as their next destination for investment in this industry.
 

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