Ho Chi Minh, Vietnam – On a sunny California afternoon in late September, Vietnam’s Prime Minister Pham Minh Chinh took a tour of Silicon Valley, cosying as much as officers at semiconductor corporations Synopsys and Nvidia.
A little bit over a month earlier in Hanoi, Pham tasked 4 authorities ministries with growing the variety of Vietnamese engineers able to working in semiconductor manufacturing by the tens of hundreds.
Authorities efforts to make Vietnam a pretty possibility for chip funding have continued within the new 12 months.
Minister of Science and Expertise Huynh Thanh Dat final month instructed native media that authorities had put tax incentives in place for high-value-added merchandise equivalent to semiconductors.
Dat mentioned the nation wished to welcome a “wave” of funding by collaborating with different ministries and tech firms to spice up analysis and draw expertise to the semiconductor sector.
Vietnam has set its sights on turning into a number one participant within the world provide chain for semiconductors – the wafer-thin built-in circuits important to trendy know-how.
As Hanoi and a bevvy of countries align on the necessity to de-risk from China amid intensifying geopolitical tensions, the Southeast Asian nation seems to have momentum on its facet in its bid to rival the dominance of Taiwan and South Korea.
But Vietnam faces obstacles, too, together with a restricted pool of expert labour and vitality insecurity within the nation’s tech manufacturing hub within the north.
The worldwide push to diversify semiconductor provide chains is in keeping with Hanoi’s improvement goals, mentioned Le Hong Hiep, a senior fellow on the Singapore-based ISEAS-Yusof Ishak Institute who previously labored as an official at Vietnam’s Ministry of Overseas Affairs.
“The semiconductor trade is seen as an important trade that may assist Vietnam rework its economic system and switch Vietnam right into a developed and high-income economic system by 2045,” Hiep instructed Al Jazeera.
“When it comes to timing and the strategic setting, it’s beneficial for Vietnam to develop the trade now.”
On the floor, Vietnam’s chip ambitions appear to be flourishing amid an inflow of international capital.
Throughout a go to to Hanoi in early December, Nvidia co-founder and CEO Jensen Huang known as Vietnam the chip big’s “second residence”, pledged to develop partnerships with native corporations and arrange a base within the nation, based on native media reviews.
Nvidia, whose market capitalisation final week surpassed $2 trillion, says it has invested $12m within the nation thus far.
A Nvidia spokesperson declined to touch upon Nvidia’s future operations in Vietnam when contacted by Al Jazeera.
Vietnam has about 5,000 engineers skilled in semiconductors however will want as many as 20,000 within the subsequent 5 years, based on the US-ASEAN Enterprise Council.
“When firms take a look at Vietnam, it seems actually good on paper however once they truly should undergo and look to see if there may be enough electrical energy, what’s the infrastructure and most significantly, what are the human assets like… I don’t suppose Vietnam goes to be the producer that it thinks it’s,” Zachary Abuza, a professor on the Nationwide Conflict School in Washington, DC who focuses on Southeast Asia, instructed Al Jazeera.
Vietnamese authorities are conscious of workforce shortcomings and are main a push to coach extra engineers, mentioned Nguyen Thanh Yen, a principal engineer on the Hanoi department of the Korean chip design firm CoAsia SEMI.
“The federal government is now aggressively planning devoted programmes to spice up up the variety of semiconductor engineers,” Yen instructed Al Jazeera.
Semiconductors had been a centrepiece of the historic improve in relations between Vietnam and the USA introduced in September, when the 2 nations agreed to a complete strategic partnership – the very best tier in Hanoi’s diplomatic hierarchy.
“We’re deepening our cooperation on essential and rising applied sciences, notably round constructing a extra resilient semiconductor provide chain,” US President Joe Biden mentioned throughout a September 9 joint press convention with Nguyen Phu Trong, the final secretary of the Communist Occasion of Vietnam.
US chip firms look like aligning with Washington’s agenda.
Arizona-based Amkor began operations at a $1.6bn chip manufacturing facility in northern Vietnam this October, whereas Delaware-headquartered Marvell introduced in Could that it could set up a semiconductor design centre within the nation.
South Korean corporations are additionally becoming a member of the frenzy. Samsung, Vietnam’s largest investor, introduced in August 2022 that it could make investments $3.3bn to fabricate semiconductor elements within the nation.
Hana Micron Vina, which specialises in chip packaging and reminiscence merchandise, is constructing a second manufacturing facility in Vietnam and plans to take a position $1bn within the nation by 2025, based on a Nikkei Asia report.
Chip corporations are “all competing for this very small, tight labour market,” Abuza mentioned. “[Vietnam] goes to have to extend their price of engineers by like 5 occasions yearly to do that.”
Others equivalent to Yen are optimistic about Vietnam’s capability to rise to the problem.
He mentioned the nation excels in math and science and 20 technical universities are beginning semiconductor coaching programmes with the aim of getting 50,000 engineers added to the workforce by 2030.
“Vietnam has the benefit of younger and hungry human assets,” Yen mentioned. “The fields that assist them earn cash most simply are sometimes within the technical sectors. Semiconductors are getting scorching now.”
Assist can be coming from outdoors.
Throughout his go to to Vietnam, Biden introduced $2m in seed funding for coaching in Vietnam’s semiconductor trade.
Europe may very well be subsequent to get entangled, mentioned Bruno Sivanandan, the co-chairman of the Digital Sector Committee on the European Chamber of Commerce Vietnam.
“There could also be partnerships with academies in Europe to help the schooling of Vietnamese staff,” Sivanandan instructed Al Jazeera. “Vietnam has such an enormous potential that isn’t but realised, so the large gamers need to Vietnam.”
Nonetheless, Vietnam could not have the posh of time with regional challengers vying for funding.
Hiep at ISEAS mentioned Malaysia and Singapore had been formidable rivals and Indonesia and Thailand had been additionally pursuing the sector.
“Everyone is in search of alternatives to determine their presence within the world chip provide chain,” Hiep mentioned. “It’s a very, very aggressive Trade.”
Vitality insecurity can be a problem.
Throughout Vietnam’s hottest summer time up to now final 12 months, northern locales skilled intermittent blackouts. In early June, the climate was so sweltering throughout a Hanoi energy outage that some households sought refuge in a mountainous cave close to town centre.
For a number of weeks, factories in industrial parks in northern Vietnam went darkish for hours at a time in the course of the afternoons.
“They needed to cease operations as a result of there was no vitality in the midst of the day for about 4 or 5 hours,” a Ho Chi Minh Metropolis-based particular person working within the vitality sector instructed Al Jazeera, asking for his title to be withheld as he had not been cleared by his firm to debate the subject.
“Samsung and different Korean factories – they had been in an enormous disaster as a result of they needed to cease their factories fully due to the shortage of electrical energy.”
After the outages, authorities launched an investigation into EVN, the nation’s state-run electrical energy supplier. Officers finally disciplined 161 EVN personnel over the facility shortages.
Northern Vietnam is closely depending on hydropower dams, which might dry up in the course of the hottest months of the 12 months when demand is at its highest. Infrastructure is outdated and the nation “lacks the grid capability and the facility assets to cope with the issue”, the vitality sector worker mentioned.
“We should always have invested within the energy transmission and energy assets within the North of Vietnam a few years in the past however EVN, they fell behind,” he mentioned.
“Within the north of Vietnam, [factories] will face an enormous downside in relation to vitality safety.”
Vitality can be a priority for European funding.
Underneath the phrases of the European Union’s commerce cope with Vietnam, European firms doing enterprise with the nation should abide by more and more stringent rules on carbon emissions, which might pose issues so long as Vietnam depends closely on coal.
“To do enterprise with Europe, you have to fulfil these necessities on carbon emissions,” Sivanandan mentioned. “If we apply this to the semiconductor trade, that is going to be a barrier.”
Abuza mentioned there’s a appreciable hole between Vietnam’s potential and the fact on the bottom.
“These chip factories and server farms and all of the high-tech stuff Vietnam desires to do actually depends on very regular electrical energy and so they simply don’t have it,” he mentioned. “Vietnam has wonderful potential for buyers however there may be a lot they’ve hassle resolving.”
