Ho Chi Minh City, Vietnam – On a sunny California afternoon in late September, Vietnamese Prime Minister Pham Minh visited Silicon Valley, accompanied by officials from semiconductor firms Synopsys and Nvidia.
A little more than a month ago in Hanoi, Pham tasked four government ministries to increase the number of Vietnamese engineers capable of working in semiconductor manufacturing by thousands.
Government efforts to make Vietnam an attractive option for chip investment continue in the new year.
Science and Technology Minister Huynh Thanh Dat told local media last month that authorities have put in place tax incentives for high-value-added products such as semiconductors.
Dat said the country wants to welcome a “wave” of investment by collaborating with other ministries and tech corporations to boost research and attract talent to the semiconductor sector.
Vietnam has set its sights on becoming a major player in the global supply chain for semiconductors — the wafer-thin integrated circuits essential for modern technology.
As Hanoi and a host of other nations adjust to the need to fend off the threat from China amid geopolitical tensions, the Southeast Asian nation is seeing rapid momentum on its side in efforts to counter the dominance of Taiwan and South Korea. comes in
Yet Vietnam also faces obstacles, including a limited pool of skilled labor and energy insecurity in the country’s tech manufacturing hub in the north.
The global push to diversify semiconductor supply chains is in line with Hanoi’s development goals, said Lee Hong Hep, a senior fellow at the Singapore-based ISEAS-Yusuf Isaac Institute who previously served as an official in Vietnam’s Ministry of Foreign Affairs. he
“The semiconductor industry is seen as a very important industry that can help Vietnam transform its economy and turn Vietnam into a developed and high-income economy by 2045,” Hype told Al Jazeera.
“In terms of timing and strategic setting, it is favorable to develop Vietnam’s industry.”
On the surface, Vietnam’s chip ambitions appear to be amid an influx of foreign capital.
During a visit to Hanoi in early December, Nvidia co-founder and CEO Jensen Hoang called Vietnam the chip giant’s “second home,” pledging to expand partnerships with local companies and set up bases in the country, local media reports. according to
Nvidia, whose market capitalization exceeded $2 trillion last week, says it has invested $12 million in the country so far.
An Nvidia spokesperson declined to comment on Nvidia’s future operations in Vietnam when contacted by Al Jazeera.
Vietnam has about 5,000 engineers trained in semiconductors but will need 20,000 in the next five years, according to the US-ASEAN Business Council.
“When companies look at Vietnam, it looks really good on paper but when they actually have to go and see if there is enough electricity, what is the infrastructure and most importantly, what are the human resources… I don’t understand. . Vietnam is going to be the producer that it thinks it is,” Zachary Abuza, a professor at the National War College in Washington, D.C. who focuses on Southeast Asia, told Al Jazeera.
Vietnamese authorities are aware of the manpower shortage and are pushing to train more engineers, said Nguyen Thanh Yen, a principal engineer at the Hanoi branch of Korean chip design company CoAsia SEMI.
“The government is now aggressively planning dedicated programs to increase the number of semiconductor engineers,” Yen told Al Jazeera.
Semiconductors were at the center of a historic upgrade in relations between Vietnam and the US announced in September, when the two countries agreed to a comprehensive strategic partnership – the highest level in Hanoi’s diplomatic structure.
“We are further strengthening our cooperation on critical and emerging technologies, particularly around building a more resilient semiconductor supply chain,” US President Joe Biden said during a joint press conference on September 9, with the Communist Party of With Vietnamese General Secretary Nguyen Phu Trong. .
US chip companies align with Washington’s agenda.
Arizona-based Amcor began operations at a $1.6 billion chip factory in northern Vietnam this October, while Delaware-headquartered Marvell announced in May that it would establish a semiconductor design center in the country.
South Korean companies are also joining the rush. Samsung, Vietnam’s largest investor, announced in August 2022 that it would invest $3.3 billion to manufacture semiconductor components in the country.
Hana Microvana, which specializes in chip packaging and memory products, is building another factory in Vietnam and plans to invest $1bn in the country by 2025, according to a Nikkei Asia report.
Chip companies are “all competing for this very small, tight labor market,” Abuza said. “[Vietnam] To do this their engineer rate would have to increase five times per year.
Others like Yen are optimistic about Vietnam’s ability to rise to the challenge.
He said the country excels in mathematics and science and 20 technical universities are launching semiconductor training programs aimed at adding 50,000 engineers to the workforce by 2030.
“Vietnam has the advantage of young and hungry human resources,” Yen said. “The fields that help them make money very easily are usually technical fields. Semiconductors are hot right now.
Help is also coming from outside.
During a visit to Vietnam, Biden announced $2m in seed funding for training in Vietnam’s semiconductor industry.
Europe may be the next to join, said Bruno Sivanandan, co-chairman of the Digital Sector Committee at the European Chamber of Commerce in Vietnam.
“There could be a partnership with academia in Europe to support the education of Vietnamese workers,” Sivanandan told Al Jazeera. “Vietnam has so much potential that has not yet been realized, so the big players are looking at Vietnam.”
Still, Vietnam may not have the luxury of time to grapple with regional challenges for investment.
At ISEAS, Hiep said Malaysia and Singapore were strong competitors and Indonesia and Thailand were also chasing the sector.
“Everyone is looking for an opportunity to establish a presence in the global chip supply chain,” Hype said. “It’s a very competitive industry.”
Energy insecurity is also a challenge.
During Vietnam’s hottest summer on record last year, northern regions experienced intermittent blackouts. In early June, the weather was so hot during Hanoi’s power outage that some families took shelter in a mountain cave near the city center.
For weeks, factories in industrial parks in northern Vietnam went dark for hours at a time.
“They had to stop operations because there was no power for about four or five hours in the middle of the day,” an individual from Ho Chi Minh City who works in the energy sector told Al Jazeera, speaking on condition of anonymity. Said to keep. He was not authorized by his company to discuss the matter.
“Samsung and other Korean factories – they were in a big crisis because they had to close their factories completely because of the lack of electricity.”
After the outage, authorities launched an investigation into EVN, the country’s state electricity supplier. Officials eventually disciplined 161 EVN personnel over the power shortage.
North Vietnam relies heavily on hydropower dams, which can dry up during the hottest months of the year when demand is highest. The infrastructure is old and the country “lacks the grid capacity and power resources to solve the problem”, the energy sector official said.
“We should have invested in power transmission and power resources in the north of Vietnam many years ago but AVN, they backed off,” he said.
“In the north of Vietnam, [factories] Energy security is a major issue to be faced.
Energy is also a concern for European investors.
Under the terms of the EU’s trade agreement with Vietnam, European companies that do business with the country must follow strict rules on carbon emissions, which could cause problems as long as Vietnam relies heavily on coal.
“To do business with Europe, you need to meet these requirements on carbon emissions,” Sivanandan said. “If we apply this to the semiconductor industry, it’s going to be disruptive.”
Abuza said there is a significant gap between Vietnam’s potential and the reality on the ground.
“These chip factories and server farms and all the high-tech things Vietnam wants to do really depend on very stable electricity and they don’t have that,” he said. “Vietnam has amazing potential for investors but there are a lot of challenges they have to address.”