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US and Vietnam Strengthen Ties in Semiconductor Industry

Biden’s Visit to Hanoi

US President Joe Biden visited Hanoi on September 10, 2023, as part of his Asia tour to bolster strategic partnerships and counter China’s influence in the region. Biden met with Vietnamese Communist Party chief Nguyen Phu Trong and Prime Minister Pham Minh Chinh, and discussed a range of issues, including trade, security, human rights, and climate change.

One of the highlights of Biden’s visit was the announcement of a new semiconductor partnership between the US and Vietnam, aimed at supporting resilient supply chains for the critical technology. Biden said that the US would provide technical assistance and financing to help Vietnam develop its domestic chip industry, which has been growing rapidly in recent years.

Biden also witnessed the signing of several agreements between American and Vietnamese chip companies, such as:

  • AI projects by Nvidia and Microsoft
  • New semiconductor design centers in Ho Chi Minh City by Synopsys and Marvell
  • The October opening of a $1.6 billion Amkor chip packaging facility near Hanoi

Biden praised Vietnam as a “vital partner” and a “leader” in the Indo-Pacific region, and said that the US was committed to deepening its cooperation with Vietnam in various fields.

Vietnam’s Chip Ambitions

Vietnam has been pursuing its chip ambitions since the late 1970s, when it established its first state-owned semiconductor factory with Soviet assistance. However, the collapse of the Soviet Union and the US sanctions hampered its development, and Vietnam fell behind other Asian countries in chip production.

US and Vietnam Strengthen Ties in Semiconductor Industry

In recent years, however, Vietnam has made significant strides in attracting foreign investment and building its own capabilities in the semiconductor sector. Vietnam has leveraged its low-cost labor, stable political environment, strategic location, and favorable trade policies to become a destination for chip manufacturing and assembly.

According to a report by PwC, Vietnam’s chip industry grew by 19.3% annually from 2015 to 2020, reaching $8.6 billion in revenue. The report also projected that Vietnam’s chip industry would grow by 15.7% annually from 2020 to 2025, reaching $16.8 billion in revenue.

Vietnam’s chip industry is mainly focused on low-end segments, such as chip packaging and testing, which account for about 80% of its revenue. However, Vietnam is also aiming to move up the value chain and develop its own design and fabrication capabilities.

Vietnam has launched several initiatives to support its chip industry, such as:

  • Establishing a national steering committee for developing the semiconductor sector
  • Providing tax incentives, subsidies, and preferential loans for chip projects
  • Investing in human resources, infrastructure, and research and development
  • Promoting collaboration between academia, industry, and government
  • Creating a national fund for science and technology development

Vietnam has also set some ambitious goals for its chip industry, such as:

  • Becoming one of the top 10 countries in chip design by 2030
  • Producing chips with a minimum feature size of 45 nanometers by 2030
  • Producing chips with a minimum feature size of 10 nanometers by 2045

Challenges and Opportunities

Despite its impressive progress, Vietnam still faces many challenges in developing its chip industry. Some of these challenges include:

  • Lack of domestic demand and market size
  • Dependence on foreign technology and equipment
  • Shortage of skilled workers and engineers
  • Limited innovation and intellectual property protection
  • High capital intensity and long payback period
  • Competition from other countries with more established chip industries

However, Vietnam also has many opportunities to overcome these challenges and achieve its chip aspirations. Some of these opportunities include:

  • Leveraging its strategic partnership with the US and other allies
  • Benefiting from the global shift of supply chains away from China
  • Exploiting its comparative advantages in labor cost and quality
  • Diversifying its product portfolio and customer base
  • Enhancing its regional integration and cooperation
  • Adopting new technologies and standards

The US-Vietnam semiconductor partnership is a testament to the potential and importance of Vietnam’s chip industry. As Biden said during his visit, “The future belongs to those who innovate.” Vietnam is determined to be one of those innovators.

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