Vietnam’s semiconductor push amid the Sino-US technological rivalry
Vietnam’s semiconductor push amid the Sino-US Technological Rivalry
WRITTEN BY TRAN THI MONG TUYEN
14 November 2024
The competition between the United States and China, which began as a trade dispute, has intensified and evolved into a broader rivalry, particularly in technology. Both countries are taking active measures to safeguard semiconductor supply chains through initiatives like the US CHIPS Act and China’s "Made in China 2025".
Caught in this technological tug-of-war, Vietnam faces both opportunities and challenges. Shifts in global value chains offer emerging economies like Vietnam a chance to integrate more deeply into these networks. Vietnam is one of the seven countries eligible for support under the US CHIPS Act, which seeks to boost semiconductor production and workforce training. Vietnam’s strengths make it an appealing partner in this initiative, further enhancing its global standing.
The great chip competition
The US CHIPS Act aims to strengthen domestic semiconductors, while "Made in China 2025" targets 70 per cent self-sufficiency in high-tech industries by 2025. As the US and China compete for global technological dominance, they are establishing competing strategic systems and supply chains forcing countries in the region to align with one or the other.
This rivalry, particularly in technology, risks "de-globalisation", and threatens to fragment the global economy, disrupting the flow of goods, services, capital, labour, technology, and data.
The US, intent on maintaining its edge, has introduced industrial policies such as the CHIPS Act, which presents additional challenges for Vietnam as it may face restrictions from both sides. While the United States' trading partners in Asia share concerns about economic security and resilience, they remain uncertain about how Washington's new emphasis on industrial policy will affect their development. With deep government resources, a large domestic market, and strong research and development capabilities, the United States has the economic strength to draw a significant portion of global investment into targeted industrial sectors. The US’ shift toward protectionism and its preference for trade with 'like-minded' allies have sparked worries that Asian exports may encounter barriers unless they conform to US standards and supply chain expectations.
To establish itself as a semiconductor hub Vietnam needs a bold strategy that leverages its ‘latecomer’ advantages. Vietnam should set clear goals and concentrate resources on developing its semiconductor industry, with milestones for 2030 and 2050.
Despite these challenges, however, there are also opportunities. As a major exporter of electronics, apparel, and food, Vietnam is crucial to the US strategy of realigning supply chains. Vietnam is also becoming an attractive destination for foreign investment, bolstered by favourable tax incentives for the semiconductor industry.
Drivers of Vietnam’s growing semiconductor role
Vietnam’s young workforce, competitive production costs, and international integration through participation in 18 free trade agreements (FTAs) make it an attractive location for manufacturing and exporting high-tech products. By attracting factories that produce machinery, raw materials, and electronic components, Vietnam can reduce its dependency on external markets and support the assembly and manufacturing of advanced technological goods.
Global technological competition also gives Vietnam a broader range of options for upgrading its infrastructure and adopting new technologies, aligning with its foreign policy of diversifying its partnerships. This strategy allows Vietnam to simultaneously collaborate with leading tech powers such as the EU, the US, and China, maximizing benefits while safeguarding national security.
Vietnam’s ambitions to develop its semiconductor industry are well-timed, coinciding with its upgraded diplomatic relations with the US leading to Washington supporting Vietnam in building a chip ecosystem, including infrastructure and workforce development. Several major US chip companies, including Intel, Amkor, Marvell, Global Foundries, and Synopsys, are already investing in and operating within Vietnam, further solidifying its role in the global chip market.
Although Vietnam has some experience in semiconductor production — having built advanced chips in the 1970s and initiated chip design projects in the 2010s — the industry’s struggle is not new due to the lack of a high level of technical expertise and significant financial resources.
However, Vietnam’s recent economic transformation suggests that the semiconductor sector could be key to its industrialization and future growth, with projections estimating the industry’s value at USD 6.6 billion by 2024. Investing in semiconductors could help Vietnam reduce geopolitical risks and achieve significant economic gains towards becoming a developed nation.
Challenges to overcome
Vietnam's semiconductor industry is facing significant challenges, primarily a shortage of labour in both quantity and quality. Despite substantial efforts to attract investment and advanced technology transfers, the industry remains hindered by the need for extensive retraining of workers, which can take six to twelve months before they can fully contribute.
Currently, Vietnam has only 5,500 chip design engineers, far below the 50,000 needed by 2030. With an annual demand for 5,000 to 10,000 new engineers, Vietnam’s ability to meet this requirement is only about 20 per cent. In addition to labour shortages, the country needs to address infrastructure gaps, including reliable access to electricity, water, high-tech parks, logistics, and suitable digital infrastructure. These challenges require substantial capital, which presents yet another major challenge for Vietnam.
A fragmented legal framework also complicates the semiconductor landscape. Laws governing the industry are spread across multiple regulations, including the Law on Information Technology, the Law on Technology Transfer, and the Law on High Technology, which lacks clear guidelines. Without a unified legal framework, investing in Vietnam’s semiconductor industry remains difficult.
Competition and cooperation in the region
The US-China geopolitical rivalry and efforts to secure semiconductor supply chains offer Vietnam an opportunity to collaborate with Taiwan, a global semiconductor leader. Taiwan’s transition from an agricultural to an advanced economy mirrors Vietnam’s path, and Vietnamese engineers are already working on advanced chip designs. Collaborating with Taiwan on workforce development and combining this with US training efforts can help Vietnam strengthen its semiconductor capabilities. By focusing on a diversified skill set, Vietnam can better position itself to meet its 2030 goals and thrive in the global semiconductor market.
Southeast Asia is currently the world’s second-largest exporter of semiconductor equipment. As ASEAN countries enhance their chip manufacturing capabilities, the region could secure its own supply chain, reducing reliance on external sources. However, competition within ASEAN is fierce.
Singapore and Malaysia lead in semiconductors, while Vietnam, Indonesia, and others are racing to develop the infrastructure needed to attract foreign investment. Vietnam's government has offered tax incentives and favourable policies for leasing industrial spaces in the semiconductor sector, while Indonesia’s "Making Indonesia 4.0" strategy is pushing towards semiconductor manufacturing as part of its broader "Golden Indonesia 2045" vision.
Strategic vision for Vietnam’s semiconductor future
To establish itself as a semiconductor hub Vietnam needs a bold strategy that leverages its ‘latecomer’ advantages. Vietnam should set clear goals and concentrate resources on developing its semiconductor industry, with milestones for 2030 and 2050. This includes establishing leading research centres and attracting foreign investment to integrate Vietnam into the global semiconductor ecosystem.
Vietnam must also engage Vietnamese professionals abroad to contribute their expertise, develop key semiconductor products, and rapidly expand a highly skilled workforce. By doing so, Vietnam can position itself as a global leader in chip design, services, packaging, and testing, and secure its place in the global semiconductor value chain.
DISCLAIMER: All views expressed are those of the writer and do not necessarily represent that of the 9DASHLINE.com platform.
Author biography
Ms. Tran Thi Mong Tuyen is a PhD Scholar at National Chengchi University and Young Leader at Pacific Forum. Prior to, she was a Fellow at the Ministry of Foreign Affairs of Taiwan, Visiting Scholar at National Taiwan University and a Non-resident fellow at Pacific Forum. Image credit: Unsplash/Flickr.