Vietnam is engaged in discussions with semiconductor companies with the goal of increasing investments in the country, potentially even constructing its inaugural chip fabrication plant, or “fab,” as indicated by two business executives. This move comes in spite of cautions from U.S. industry representatives regarding elevated costs.

US officials warn of high costs as Vietnam looks to build its first semiconductor plant

In this illustrative image captured on February 17, 2023, semiconductors are visible on a printed circuit board.

Vietnam, known as a prominent electronics manufacturing center in Southeast Asia, is already home to the largest semiconductor packaging and testing facility worldwide for U.S. giant Intel. It also accommodates various software firms specializing in chip design. The country is actively formulating a strategy to attract additional investments in the semiconductor sector, including from foundries dedicated to chip manufacturing.

In recent weeks, discussions have been held with around six U.S. chip companies, including fab operators, as stated by Vu Tu Thanh, who serves as the head of the Vietnam office of the US-ASEAN Business Council, in communication with Reuters. However, he refrained from disclosing the names of the companies since the discussions are in their initial stages.

Additionally, an executive within the chip industry, who opted to remain anonymous due to media restrictions, mentioned that talks with prospective investors have encompassed U.S. contract manufacturer GlobalFoundries and Taiwan’s PSMC.

The objective was to establish Vietnam’s inaugural fab, primarily for the production of less advanced chips intended for use in automotive or telecommunications applications, as conveyed by the anonymous executive.

These discussions came after a significant enhancement of formal relations between Vietnam and the United States in September. During President Joe Biden’s visit to Hanoi, the White House characterized Vietnam, a former adversary, as a possible “critical player” in the global semiconductor supply chain.

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GlobalFoundries did participate in a restricted business summit during Biden’s visit, following a personal invitation from the president. However, a source familiar with the matter has indicated that the company has not immediately expressed interest in investing in Vietnam.

When asked about subsequent contacts, a GlobalFoundries spokesperson responded, “We do not comment on market rumors.” There was no response to a request for comment from PSMC.

Industry sources have noted that meetings at this stage are primarily aimed at assessing interest and discussing potential incentives and subsidies. These incentives may include support related to power supplies, infrastructure, and the availability of a skilled workforce.

The Vietnamese government has expressed its desire to establish its first fab by the conclusion of this decade. In a recent announcement, chip companies were informed that they would receive “the highest incentives available in Vietnam.”

There is also a possibility of backing local companies, including state-owned tech firm Viettel, to construct fabs using imported equipment, as indicated by Hung Nguyen, senior program manager specializing in supply chains at the University of Vietnam in Hanoi.

Viettel did not reply to a request for comment.


However, Robert Li, Vice President of U.S. chip design company Synopsys, which operates in Vietnam, advised the government to exercise caution before providing subsidies for fab construction. He pointed out that establishing a foundry could entail costs as high as $50 billion, and Vietnam would be competing with countries like China, the United States, South Korea, and the European Union, all of which have unveiled spending plans ranging from $50 billion to $150 billion for chip development.

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At the “Vietnam Semiconductor Summit” held in Hanoi, Robert Li emphasized the need for careful consideration. John Neuffer, President of the U.S. Semiconductor Industry Association, echoed this sentiment at the same conference, suggesting that the government should concentrate on chip sectors where Vietnam already possesses strength, such as assembly, packaging, and testing.

Reuters Graphics Reuters Graphics

Reported by Francesco Guarascio, with additional contributions from Khanh Vu in Hanoi and Fanny Potkin in Singapore; Edited by Lincoln Feast.

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